What impact will buying 38250 bitcoins have on the market
In the face of the volatility, drama, and excitement of DeFi, Bitcoin is starting to look rather uninteresting. Its price has barely fluctuated from a year ago, and you can't even use it to participate in the boom in liquidity gains.
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Michael Saylor
Saylor graduated from MIT in 1987 and founded Microstrategy at the age of 24.
MicroStrategy is a"Business Intelligence"Corporations, developing software to allow companies to use their own data to drive decision-making.
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MicroStrategy's $500 million big deal
Having $500 million in cash doesn't sound like a problem to most people. Before this, it was not a problem for large enterprises. Before the 2008 financial crisis, there was a time when the risk-free rate of return on cash was 5% per annum. That means a company can sit on $500 million, make $25 million a year doing nothing, and have cash on hand for a rainy day.
Today, when the risk-free rate has plummeted to 0.69% due to loose fiscal policy accompanied by inflation, that's not the same. In Saylor's own words,"secondary title"
Cash is 'junk'
So, what should a company do with a dwindling 500 million yuan? Facts have proved that it is not so easy to move the 500 million US dollars in a short period of time.
You can buy back 500 million shares of your own company. For a company like MSTR, Saylor estimates it will take four years.
You can buy real estate. However, commercial real estate prices have plummeted in the wake of the coronavirus, and owners still believe their assets are worth as much as they were in January. In other words, good luck getting a fair market price.
You can buy blue chips. Amazon, Apple, Google, Facebook. However, your risk is symmetrical. They can go down 50% just as easily as they can go up 50%.
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buy boldly
What Saylor ultimately wants is to either lose half of it, or gain 10 times. An investment similar to buying Amazon or Apple in 2012. In other words, asymmetric risk.
Saylor observes that the winning strategy of the past decade has been to find some"digitally-dominated network", to digitize some basic things of society. Apple digitizes mobile communications. Amazon digitizes commerce. Google digitizes the process of collecting information.
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With that conclusion in mind, the next thing Saylor had to do was get everyone at MicroStrategy to sign off on this unusual decision. In order to do this, he just made everyone learn about Bitcoin like most people in the industry.
He has everyone at the company watch Andreas Antonopoulous videos, read The Bitcoin Standard, watch Eric Vorhees debate Peter Schiff, and listen to Pomp and the NLW podcast. In the absence of hard-line naysayers, MicroStrategy resorted to enforcement. They first invested $250 million to buy 21,454 BTC in August, and then invested another $175 million (16,796 BTC) in September, for a total of $425 million and 38,250 BTC.
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Add a color to the history of Bitcoin development
Skeptics point to the fact that MicroStrategy (MSTR) stock has been on a downtrend since 2013 as the real reason behind MicroStrategy's bold moves. Regardless, the move makes a lot of sense for the company's shareholders. As TBI observes, MicroStrategy is now both a software company and 1/3 of its market capitalization in Bitcoin. At the time of writing, MSTR was up 20%.
Only time will tell if this move is a remarkable strategic decision or a colossal corporate blunder. In the short term, it adds a lot of color to the huge victory of Bitcoin's digital gold investment theory.
Billionaire hedge fund manager Paul Tudor Jones also holds 1% of Bitcoin in his asset allocation. A public company has bitcoin as its primary reserve asset. CFOs and fund managers around the world are no doubt taking notice, so who's next?
