MicroStrategy CEO Saylor says bitcoin's short-term volatility is largely irrelevant

MicroStrategy CEO Saylor says bitcoin’s short-term volatility is largely irrelevant

According to MicroStrategy CEO Michael Saylor, Bitcoin’s short-term volatility is largely irrelevant once you understand the fundamentals of the leading cryptocurrency and how difficult it is to create something better.

“Bitcoin is the most certain thing in a very uncertain world, more certain than any other 19,000 cryptocurrencies, more certain than any stock, more certain than owning property anywhere in the world,” he said in a recent interview with The Block. A week after appearing at CoinMarketCap’s The Capital virtual conference.

Saylor said people who spend at least $100 on bitcoin can talk about the cryptocurrency, but otherwise they probably “should have nothing to say about it.”

MicroStrategy’s bet on bitcoin

Saylor’s software company has a huge bitcoin position — have129,218 bitcoins – and has become one of the leading proponents of cryptocurrency since it was added to his company’s balance sheet in August 2020.

MicroStrategy’s most recent acquisition, revealed in an April 5 filing, was the purchase of 4,167 bitcoins worth approximately $190.5 million. In that caseBitcoin was trading at $45,714.

The company purchased total bitcoin holdings at an average price of $30,700. with bitcoin trading $29,716.37 On Sunday, Saylor’s company is red in its purchases – although it has no plans to sell it, he said.

He said bitcoin had to drop 95% before the company could even consider doing anything, even then, aforementioned In the past, the company could provide alternative collateral.

In order MicroStrategy takes out three loans to fund Bitcoin bet By issuing convertible senior notes and senior secured notes between December 2020 and June 2021.

Convertible senior notes are debt securities that contain options that will be converted to a certain amount of the issuer’s equity when they mature. When they become due, they must either be converted into equity, repaid in cash, or a combination of both. Senior secured notes are loans that use the issuer’s assets as a form of collateral.

In June 2021, MicroStrategy issued senior collateralized notes that are secured with assets containing any bitcoin purchased at or after the closing of the offer. Still, it did not include MicroStrategy’s existing bitcoins or any bitcoins that could be purchased with current bitcoin or proceeds from other holdings.

MicroStrategy and Bitcoin on a rough ride in May

In May, MicroStrategy’s share price hit a 20-month low of $159.67 before rebounding to close the month at $246.65, which is still low at $355.68. Over the month, the company’s bitcoin position has dropped to the red where it left off.

Bitcoin prices fell in May as the cryptocurrency and broader financial markets were in turmoil. After the initial drop in crypto prices earlier in the month and as the broader macroeconomic environment worsened, prices fell further during the collapse of the Terra blockchain following the failure of stablecoin TerraUSD (UST).

This contagion has plunged bitcoin below $30,000 as it plummeted to 18-month lows since trading at around $27,000 on December 21, 2020. While many observers declared this to be clear evidence of a crypto bear market, Saylor said he was not convinced.

“I don’t know if it’s a bear market or not, but if it’s a bear market, we’ve had three in the last 24 months,” he told The Block. Saylor was referring to April 2021, when the price surged to $60,000 before dropping to around $31,000 by July 2021, and then hit an all-time high of $69,000 in November 2021.

Saylor added that he prefers not to get hung up on short-term prices and that people who focus too much on the charts “play with the tea leaves.”

His view: “If you don’t plan to hold it for four years, you’re not really an investor, you’re a trader, and my advice to traders is don’t trade it, invest in it.”

TerraUSD and bitcoin as backup assets

One of the main reasons why bitcoin and crypto prices fell in May was the capitulation of TerraUSD and luna (LUNA), the two main offerings of the Terra blockchain.

Terra’s ecosystem comes under pressure After its stablecoin, TerraUSD, lost its stablecoin against the dollar on May 7, a joint relationship between TerraUSD and luna is that TerraUSD has a “forex reserve” of over $3 billion and a bitcoin reserve that it has drained to no avail. also pulled down. tries to defend his latch.

TerraUSD had a burning mechanism that included luna, so anyone who owned TerraUSD could exchange one token for $1 lunar tokens in a de-peg state – for example, if TerraUSD was trading at $0.95.

This would make TerraUSD more scarce, and pushing the price back to $1 would also encourage holders to hold steady by allowing them to take advantage of the price difference and potentially earn arbitrage profits.

Still, after TerraUSD lost the dollar on May 7, the Luna Foundation Guard (LFG), a nonprofit that manages Terra’s forex reserve, used most of its reserves to purchase UST and made an unsuccessful attempt to maintain the stable.

Despite the collapse of TerraUSD and the depletion of bitcoin reserves, Saylor argued that bitcoin is a valuable reserve asset.

“I think it all comes down to the amount of leverage. I think it makes a lot of sense to use Bitcoin as a reserve asset,” he said, noting that with reasonable leverage, such as owning $1 billion worth of bitcoin and issuing $50 million worth of stablecoins, there would be significantly less risk using bitcoin as a backup asset. .

The problem with Terra isn’t the idea of ​​owning bitcoin, but he said they have too much TerraUSD.

© 2022 The Block Crypto, Inc. All rights reserved. This article is for informational purposes only. It is not presented or intended to be used as legal, tax, investment, financial or other advice.

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