MicroStrategy Buys $250M in Bitcoin, Calling the Crypto ‘Superior to Cash’

[The Sceptical Chymist]

Nice U-turn, Micheal:
<snip>
From declaring Bitcoin a doomed asset to embracing it buying the 0.1% or the total supply. Better than being stubbornly wrong.

That's an interesting find.  And yeah, it's a smart U-turn and it's kind of cool that he's had his eyes on bitcoin for that long.  That makes me think he probably knows what he's doing.

MSTR's stock is up 1.26% as I write this, so it doesn't look like this huge bitcoin purchase triggered a shareholder revolt or anything of the like. 

I'd be vary of such orgs coming into btc trading... Sorta defeats the purpose of it surviving as a currency and only as a trading mechanism; which is not what it should primarily be.

Well, companies usually keep some sort of cash reserve if they're able to.  I don't see any problem with a corporation deciding to keep that reserve in the form of bitcoin instead of USD or some other cash equivalent.  Nor do I see any threat to bitcoin's future as a currency by MSTR's actions.

[1715082369]

1715082369

[1715082369]

1715082369

[gentlemand]

That's an interesting find.  And yeah, it's a smart U-turn and it's kind of cool that he's had his eyes on bitcoin for that long.  That makes me think he probably knows what he's doing.

One thing professional finance people certainly aren't is sentimental when there's money in the air so the gradual acceptance that this thing might have actual legs on their part is going to be a monstrously powerful development.

[7788bitcoin]

Well, companies usually keep some sort of cash reserve if they're able to.  I don't see any problem with a corporation deciding to keep that reserve in the form of bitcoin instead of USD or some other cash equivalent.  Nor do I see any threat to bitcoin's future as a currency by MSTR's actions.

Is it even possible for a corporation to take a decision that would allow them to keep their reserve in any other asset, i do not think so it is possible, if it is a small private firm it might be possible as the individual can take the decision but that is not possible with a corporation as you need the permission of the board members to make those decisions and it is not that easy to convince everyone.

With MicroStrategy one person (Michael J Saylor ) is holding the Chairman, President and CEO position and hence he can take his decisions about his reserve holdings.

[Upgrade00]

< >

Very aptly put. The versatility of Bitcoin is one of the factors that gives it value as it appeals to several classes of people. This coupled with its other advantages may actually limit its use in the long term as a means of making daily payments. Why spend my $100 worth of bitcoin on a bicycle when those bitcoins could be worth $121 by the next day? People still ask if the 10,000BTC for 2 pizzas guy still regrets it, well spending 0.002BTC for 2 pizzas would likely be ridiculous a decade from now.
Merchants may eventually switch from payment processors when they recognize this huge value potential as you said, but would more people be willing to give away bitcoins.

[allahabadi]

I'd be vary of such orgs coming into btc trading... Sorta defeats the purpose of it surviving as a currency and only as a trading mechanism; which is not what it should primarily be.

Wary you mean? The bitcoin network actually needs companies like MicroStrategy and even bigger ones to join the network, I don't see any cons in it, it appreciates adoption and encourages other establishments to also come in. Btc's purpose btw isn't to survive as a currency, and I don't think it matters at all what people or establishments do with btc when they buy it. That being said, if bitcoin is to serve as more of a currency like you said, more adoption is of course needed and that can only come with more of this kind of news.

Wary yes; fat fingers thumbo*

They ain't contributing to the network; I don't see them mining; just PnD. Declare that u r buying to pump it and then dum when u see sufficient pump. Adoption isn't PnD.

[JayJuanGee]

< >

Very aptly put. The versatility of Bitcoin is one of the factors that gives it value as it appeals to several classes of people. This coupled with its other advantages may actually limit its use in the long term as a means of making daily payments. Why spend my $100 worth of bitcoin on a bicycle when those bitcoins could be worth $121 by the next day? People still ask if the 10,000BTC for 2 pizzas guy still regrets it, well spending 0.002BTC for 2 pizzas would likely be ridiculous a decade from now.
Merchants may eventually switch from payment processors when they recognize this huge value potential as you said, but would more people be willing to give away bitcoins.

Of course, the calculation regarding whether to spend your bitcoins will be different for people in differing places and whether they have other options available to them.

My recollection of the Lazlo pizzas example is that Lazlo was one of the earliest of GPU miners, and perhaps he felt a bit guilty regarding the mining advantage that he had in terms of generating so many bitcoins while they hardly had any actual monetary value at the time, so I am NOT very tied into the sob stories regarding folks who spent too many bitcoins too soon because they could have been worth 1,000x more valuable down the road.

In that regard, we choose our payment mechanism based on what kinds of payments we have available to us, and if we can easily replace whatever bitcoins that we spend, then we might have a greater incentive to spend the bitcoins because it is not really much of a difference regarding what payment form that we choose.

However, the longer that bitcoin has had a monetary value, and even the fact that some companies might even be placing extra KYC/AML costs on people to acquire bitcoins, and governments might be becoming more stringent in terms of requiring an accounting for tax purposes or whatever, then greater disincentives will also be created for spending, and why not just spend my credit card and earn bonus points, or spend one of my other cryptos that are not as likely to retain value... which are Gresham Law type incentives.

We also cannot really know exactly whether bitcoin is going to compete some other payment processors out of existence - or what payment processor options that we might have available, including if some of the payment processors might attempt to attract customers by gaining credibility by linking themselves to bitcoin in one way or another.. .but there is likely a lot of development and passage of time that needs to take place before speculating too much about if we might be more inclined to spend our bitcoins based on whether we have other spending options and if we were to assume that there are no other spending options, except bitcoin because bitcoin has competed away all of the other lesser forms of money, we still could consider how we would spend our bitcoin for some seemingly basic needs like housing, utilities, food, transportation because if we only have bitcoin as a payment option, we still would likely choose to spend our bitcoin on those basic living needs, but we might become a bit more selective whether we might want to consume right away or to delay gratification if we were faced with decisions about whether to consume some luxury/more discretionary items, such as hookers, lambos and blow, depending on how many bitcoins that we have and where we are at in our lives in terms of earning power (or bitcoin cashflow), too.

[JayJuanGee]

I'd be vary of such orgs coming into btc trading... Sorta defeats the purpose of it surviving as a currency and only as a trading mechanism; which is not what it should primarily be.

Wary you mean? The bitcoin network actually needs companies like MicroStrategy and even bigger ones to join the network, I don't see any cons in it, it appreciates adoption and encourages other establishments to also come in. Btc's purpose btw isn't to survive as a currency, and I don't think it matters at all what people or establishments do with btc when they buy it. That being said, if bitcoin is to serve as more of a currency like you said, more adoption is of course needed and that can only come with more of this kind of news.

Wary yes; fat fingers thumbo*

They ain't contributing to the network; I don't see them mining; just PnD. Declare that u r buying to pump it and then dum when u see sufficient pump. Adoption isn't PnD.

Pump and dump can still be part of adoption, and if the demands on bitcoin is greater than the selling pressure, then who gives any shits if some BIG wigs believe that they are getting ahead by selling all of their bitcoin when they end up getting left behind because they sell too much too early and then they have to FOMO buy back into BTC if they want to regain their position.

In other words, there is no clear answer that pump and dumpers are always negative on bitcoin's overall price dynamics, even in 2017, there were a whole lot of folks who speculated that BTC was only going within a $3k to $5k price arena, so a lot of folks dumped their bitcoin in that range or even before that range out of anticipation of front-running.. but then some of them may have ended up getting screwed out of their bitcoin because the BTC price went 4x to 6x higher than their highest of expectations and even the ones who might have wanted to sit out the volatility might not have even been able to get back in below $3k like they were hoping on the severe dip... so it is not always so clear that pumper/dumpers come out ahead in the long run if they don't play their cards right... and really nothing to say that this time is going to be any different with many folks selling too much too soon again.. even while nothing is guaranteed, either way.

[Darker45]

Nice U-turn, Micheal:

~snip~

From declaring Bitcoin a doomed asset to embracing it buying the 0.1% or the total supply. Better than being stubbornly wrong.

This is funny.

But, well, it is never too late to learn a lesson, realize something, or turn into a new leaf. Rather than stubbornly stick to your old conviction just for the sake of protecting your ego even though it has already dawned on you that it was wrong, you better be open and fluid like the water. You just have to trust the flow and it will bring you to a better cash and a superior store of value. LOL.

The days of other Michael Saylors out there are numbered. It's just a matter of time before they swallow their own pride whole and take a u-turn.

[exstasie]

MSTR's stock is up 1.26% as I write this, so it doesn't look like this huge bitcoin purchase triggered a shareholder revolt or anything of the like.

It actually gapped up almost 18% at the peak yesterday, closing up about 9% overall on the day.

Shareholders (and let's be honest, hype buyers) may be happy now. We'll see how happy they are if BTC takes a dump!

[gentlemand]

Shareholders (and let's be honest, hype buyers) may be happy now. We'll see how happy they are if BTC takes a dump!

If this was a brazen way to boost themselves by jumping on another hype train they may live to regret that. Ideally it's a clear-eyed financial decision but there's no way of controlling how it's going to be perceived by others. 

[JayJuanGee]

Shareholders (and let's be honest, hype buyers) may be happy now. We'll see how happy they are if BTC takes a dump!

If this was a brazen way to boost themselves by jumping on another hype train they may live to regret that. Ideally it's a clear-eyed financial decision but there's no way of controlling how it's going to be perceived by others. 

Yes.. Many of us are speculating that the four year fractal is lining up, and we can also see the UPpity pattern on the stock to flow model, but surely, there are no guarantees that continuing BIG players sucking up BTC supply is going to cause BTC prices to go up - so lot's of folks would be disappointed to go into a 6 to 18 month correction from here - while at the same time, many of us know that there is a certain level of physicality limitations to bitcoin, and ongoingly pushing BTC prices down or trying to keep them flat is going to cause even more UPwards price pressures - and maybe even GREATER incentives to screw the fuck out of any  BTC down manipulators who are not holding actually in fact holding real bitcoin, but instead manipulating down with dollars while proclaiming to hold actual bitcoin.

I am looking forward (I suppose a kind of hope) for those fractional reserve players to get fucked over when the BTC price goes shooting up, but they are not actually holding the underlying asset that they claim to be holding.  We know that they are good at such making shit up shenanigans within the traditional space, and maybe the million dollar question continues to be whether they can be successful to make shit up in the bitcoin space, especially if some players might be ready, willing and able to demand their keys (or to demand an actual and credible audit of the purported BTC holdings... not so difficult to accomplish in bitcoin - even though many BIG players in the traditional space are not used to showing their real books).

[bearexin]

They have spent under $11.7k price to buy all that bitcoin, which means they were technically in profit up to few days ago, I hope that they are not shocked that bitcoin went down already because to be honest gold went down as well, so things are looking better for the economy in the world a bit, and I think that is why it would be smart to actually wait out this period.

When things get settled a bit they are going to be in profit once again. All in all 250 million dollars going into bitcoin should have made a bigger move in the market, which tells me they probably bought OTC to not bother the public. However if they bought it from the market itself, they could have increased the price while buying and also profit while buying as well, would have been a smarter decision.

[JayJuanGee]

They have spent under $11.7k price to buy all that bitcoin, which means they were technically in profit up to few days ago, I hope that they are not shocked that bitcoin went down already because to be honest gold went down as well, so things are looking better for the economy in the world a bit, and I think that is why it would be smart to actually wait out this period.

When things get settled a bit they are going to be in profit once again. All in all 250 million dollars going into bitcoin should have made a bigger move in the market, which tells me they probably bought OTC to not bother the public. However if they bought it from the market itself, they could have increased the price while buying and also profit while buying as well, would have been a smarter decision.

Sure, there seem to be quite a few entities that have abilities to buy quantities of 20k BTC or more with their cash reserves, and it would logically follow that in the near future, some of these kinds of entities might NOT have engaged in sufficient due diligence to try to source their BTC through OTC channels (or maybe some OTC channels are drying up, too), so then they are faced with troubles sourcing their bitcoin through OTC means, and therefore, if they want to get into BTC sooner, rather than later, they may be forced to buy their decently large quantities of BTC on the market or on various exchanges where they would be able to find such potentially large quantities of BTC.

In the near future, I would not be totally surprised to find out about something like large quantities of BTC (maybe even quantities in the 20k BTC plus arena) being sourced at spot prices and maybe attempted to be spread across a few exchanges and even attempting to make buys in such ways that prevent as much slippage as possible.  Probably not easy to accomplish preventing of slippage when quantities that are wanted might be really high amounts, but likely better to have some slippage than waiting it out during circumstances in which the BTC price is going up and some of the well-capitalized entities are looking for solid possibilities for a return on their investment and might not have been able to find OTC sources for acquiring a sufficient amount of the BTC that they would like to get.

[exstasie]

Shareholders (and let's be honest, hype buyers) may be happy now. We'll see how happy they are if BTC takes a dump!

If this was a brazen way to boost themselves by jumping on another hype train they may live to regret that. Ideally it's a clear-eyed financial decision but there's no way of controlling how it's going to be perceived by others. 

Reminds me of a bit of the story of Bioptix. They were a dying biotech company that overnight began mining BTC and changed their name to "RIOT Blockchain Inc."

Its chart:



Note the recent 800% gain from March to August.

[rdbase]

Well, companies usually keep some sort of cash reserve if they're able to.  I don't see any problem with a corporation deciding to keep that reserve in the form of bitcoin instead of USD or some other cash equivalent.  Nor do I see any threat to bitcoin's future as a currency by MSTR's actions.

Is it even possible for a corporation to take a decision that would allow them to keep their reserve in any other asset, i do not think so it is possible, if it is a small private firm it might be possible as the individual can take the decision but that is not possible with a corporation as you need the permission of the board members to make those decisions and it is not that easy to convince everyone.

With MicroStrategy one person (Michael J Saylor ) is holding the Chairman, President and CEO position and hence he can take his decisions about his reserve holdings.

This site explains what microstrategy had in plan all along with their headlong into bitcoin purchase:


source: https://blog.knoxcustody.com/bitcoin-safest-reserve-asset/

Hence their specializing in strategic operations after all and are the best in the world at it.
They knew exactly what they were doing every step of the way according to the above article if you read through it carefully enough to see where they were going with all this.
Bloody hell, they hold more BTC than grayscale after that buying spree.

https://www.forbes.com/sites/christopherbrookins/2020/08/14/microstrategy-just-sent-green-light-to-corporate-america-on-bitcoin/#7b3cda916bc4

[fillippone]

Nothing new that hasn’t been already said in this thread, but I found a very nice piece regarding this move by MicroStrategy explaining in a very clear way why and how it is relevant, and how could impact future moves by other companies.
Definetly worth a read:
 Is Bitcoin the world’s safest reserve asset?

“MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively,”

As first movers, they had an advantage:

MicroStrategy’s move snapped up 0.1% of Bitcoin’s fixed supply of 21 million units, accounting for 50% of their excess cash reserves in a novel capital allocation strategy. Given the finite pool, such a material grab of bitcoin could only be accomplished by 978 companies before the supply technically “runs out”, though in practice a large chunk of extant supply is not even for sale

Time to move is now, soon it will be impossible to buy the 0.1% of the total bitcoin supply, even for the biggest companies.


Others have to take note:

Now that Bitcoin has been adopted as a primary reserve asset by MicroStrategy, a well-capitalized NASDAQ-listed firm, other companies will be forced to sit up and take notice. Amid the recent economic downturn driven by globalized lockdowns and supply chain disruptions in the first half of 2020, companies slowed down their investment programs, reduced costs, and raised cash reserves to adjust to the economic uncertainty. The companies comprising the Nasdaq 100, the index of the 100 largest non-financial companies traded on the Nasdaq stock market, are now sitting on nearly $1 trillion in cash

[gentlemand]

Nothing new that hasn’t been already said in this thread, but I found a very nice piece regarding this move by MicroStrategy explaining in a very clear way why and how it is relevant, and how could impact future moves by other companies.
Definetly worth a read:

This is the most striking quote to me from there - 'Given the finite pool, such a material grab of bitcoin could only be accomplished by 978 companies before the supply technically “runs out”, though in practice a large chunk of extant supply is not even for sale.'

A company that hardly anyone has heard of has that much with what is effectively chump change in global terms. There's a whole lot of headroom to go, but that headroom is going to be met by an ever more dramatic squeeze in availability.

I hope people who own it right now manage to wrap their heads around the scale involved here. I see every day that they can't. If they don't recalibrate their perception someone will buy their BTC off them who does and benefit a whole lot more.

[fillippone]

Agree, I am going to edit previous message with that sentence. Anyway rest assured that securing the 0.1% of total supply will be increasingly difficult for any company.
First movers have a big, enduring advantage here.
I bet on Twitter for first “mainstream” company following this example.

[coolcoinz]

Shareholders (and let's be honest, hype buyers) may be happy now. We'll see how happy they are if BTC takes a dump!

If this was a brazen way to boost themselves by jumping on another hype train they may live to regret that. Ideally it's a clear-eyed financial decision but there's no way of controlling how it's going to be perceived by others. 

It certainly is working wonders for the company now. The average joe like me has never heard of microstrategy but now it's everywhere in the crypto space. It's exploring new markets and taking advantage of free publicity. Evein if the investment doesn't bring the expected profit it's still going to be good for them (most likely). I'm positive that if they hold it for another 2-3 years they will make money, even if there's a dump in the coming months.

[exstasie]

There is definitely a lack of Bitcoin or crypto-exposed equities on stock exchanges. I know of people who trade RIOT because of such exposure. If Bitcoin starts mooning, a lot of stock investors are going to have their eyes on MicroStrategy.

Bloody hell, they hold more BTC than grayscale after that buying spree.

The scale of it is quite impressive. If this happens a few more times, I could see that generating some FOMO in the market.

I hope people who own it right now manage to wrap their heads around the scale involved here. I see every day that they can't. If they don't recalibrate their perception someone will buy their BTC off them who does and benefit a whole lot more.

When $1 million?