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

[JayJuanGee]

It looks like they are following a pattern, basically because the price has been trending up since they bought their first stash.

I'm an advocate of buying a small amount of bitcoin regularly but being able to HODL what you have bought for multiple months or even multiple years depending on your end game with the budget you set yourself.

So, there are two questions:  Is the MicroStrategy strategy of seemingly regular purchases an up-scaled version of what I wrote above?  And, if so, what is MicroStrategy's end-game for the coins?  (i.e. dump at a given price?  Dump on a given date?  Or just HODL indefinitely?)

Huh?

Have you even read any posts in this thread that include several times referring to the stated intentions of Saylor/MSTR?

In the past year, several times, Saylor has repeated on behalf of MSTR that they are buying for the long term and planning to hold for 100 years.. so interpret those kinds of bold statements as you will.. or read what some of us have been saying in this here thread in the past year or more in regard to those kinds of statements of intentions topics.

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[oHnK]

Found a chart of all MicroStrategy BTC investments:



If you look at this graph and analyze the MicroStrategy investment methodology, you can say that they are acting very competently.

After looking at the chart of Bitcoin purchases by Microstrategy, it makes sense that this will have an impact on increasing the MSTR share price when the crypto market is bullish.  When BTC price conditions strengthen, their shares also strengthen.  Their investor psychology will always associate the company with BTC price conditions.  Their consistency in buying BTC as an investment gives a change in the structure of assets on the company's balance sheet.  Fundamentally, investors will see the value of the assets they have, so for stock investors who want to try new things in their portfolio but don't want to be directly in the crypto market, MSTR shares are very suitable to be owned and this is quite different from other companies that are also listed on the NASDAQ  like Greyscale.  MSTR's operational focus is not BTC, they are just companies interested in trying new types of investments.

[JayJuanGee]

Found a chart of all MicroStrategy BTC investments:



If you look at this graph and analyze the MicroStrategy investment methodology, you can say that they are acting very competently.

After looking at the chart of Bitcoin purchases by Microstrategy, it makes sense that this will have an impact on increasing the MSTR share price when the crypto market is bullish.  When BTC price conditions strengthen, their shares also strengthen.  Their investor psychology will always associate the company with BTC price conditions.  Their consistency in buying BTC as an investment gives a change in the structure of assets on the company's balance sheet.  Fundamentally, investors will see the value of the assets they have, so for stock investors who want to try new things in their portfolio but don't want to be directly in the crypto market, MSTR shares are very suitable to be owned and this is quite different from other companies that are also listed on the NASDAQ  like Greyscale.  MSTR's operational focus is not BTC, they are just companies interested in trying new types of investments.

Even though I do largely agree with your overall post, your last sentence does seems to capture a kind of divergence in how you seem to be thinking about this matter and does not seem to capture the level of orange pilledness that Saylor has become within the past year and a half.

Accordingly, Saylor is not merely interested in "new types of investments," and your earlier uses of the term "crypto" in your post seems to also demonstrate that you might not understand Saylor's focus happens to be on bitcoin.. not such amorphous thing such as crypto...  no need to even use such dumbass vague term, especially if you are meaning to say bitcoin, but you just cannot bring yourself around to using the term bitcoin, because you do not quite understand what Saylor is doing and how he is considering the bitcoin matter...

I will concede that my point might come off as quibbling about a minor thing, but there is something specific and special about bitcoin that has lured Saylor into it.. and to cause his company to supplement its focus onto bitcoin, and maybe at some point, the company moves away from other aspects of its business, even though I believe that their software portion does remain quite profitable, but maybe even that part of their business ends up getting more intertwined with bitcoin, since Saylor surely does seem to appreciate the value in attempting to be creative in various ways to incorporate bitcoin into what he and his company is doing.....

Consider how much effort that Saylor had to employ to short-termedly (within about 6 months of his own getting into bitcoin) setting up some pretty sophisticated educating companies and rich peeps about bitcoin.. and Saylor did not need to engage in such an open-book approach to bitcoin in terms of sharing his journey and his (and his company's) journey into bitcoin, but he did because that shows some of the level of his obsession.. which is about bitcoin and not about "new types of investments" - even if bitcoin happens to fit within the category of a "new type of investment."

[fillippone]

I will concede that my point might come off as quibbling about a minor thing, but there is something specific and special about bitcoin that has lured Saylor into it.. and to cause his company to supplement its focus onto bitcoin, and maybe at some point, the company moves away from other aspects of its business, even though I believe that their software portion does remain quite profitable, but maybe even that part of their business ends up getting more intertwined with bitcoin, since Saylor surely does seem to appreciate the value in attempting to be creative in various ways to incorporate bitcoin into what he and his company is doing.....

Nah, Microstrategy was a dying company before Bitcoin.
And now it's a dying company holding a large chunk of coins.
As far as I know MSTR was a company with no profit, or even results or any type to justify their activity.

Now they are devoting all of their resources to service their bitcoin investment and knowledge, in order to make new commitments to the orange coins. The actual activity hds been degraded to ancillary to this business.

[KarpovE4]

Saylor is a bitcoin marxist he believes in Bitcoin judging from the amount of bitcoin he owns, one would not be wrong to call him a whale. Saylor isn't an early investor to bitcoin. He started getting involved in Bitcoin in 2019 nevertheless he talks about Bitcoin a lot on the media. Microstrategy is not the only company buying bitcoins, Grayscale is on top of the list. Tesla CEO, Elon Musk is a crypto fan his tweets about doge made the crypto famous.

[dastardleek]

Saylor is a bitcoin marximalist, he believes in Bitcoin judging from the amount of bitcoin he owns, one would not be wrong to call him a whale. Saylor isn't an early investor to bitcoin. He started getting involved in Bitcoin in 2019 nevertheless he talks about Bitcoin a lot on the media. Microstrategy is not the only company buying bitcoins, Grayscale is on top of the list. Tesla CEO, Elon Musk is a crypto fan his tweets about doge made the crypto famous.

"marximalist"? Is that a new term I missed?

If not, can it be a new term, please?

[KarpovE4]

Saylor is a bitcoin marximalist, he believes in Bitcoin judging from the amount of bitcoin he owns, one would not be wrong to call him a whale. Saylor isn't an early investor to bitcoin. He started getting involved in Bitcoin in 2019 nevertheless he talks about Bitcoin a lot on the media. Microstrategy is not the only company buying bitcoins, Grayscale is on top of the list. Tesla CEO, Elon Musk is a crypto fan his tweets about doge made the crypto famous.

"marximalist"? Is that a new term I missed?

If not, can it be a new term, please?

My own little contribution to bitcointalk.  dastardleek I want my royalties if this blunder gets popular as hodl

[JayJuanGee]

Saylor is a bitcoin marximalist, he believes in Bitcoin judging from the amount of bitcoin he owns, one would not be wrong to call him a whale. Saylor isn't an early investor to bitcoin. He started getting involved in Bitcoin in 2019 nevertheless he talks about Bitcoin a lot on the media. Microstrategy is not the only company buying bitcoins, Grayscale is on top of the list. Tesla CEO, Elon Musk is a crypto fan his tweets about doge made the crypto famous.

"marximalist"? Is that a new term I missed?

If not, can it be a new term, please?

It's for when people are trying to put politics into bitcoin, and bitcoin (aka king daddy, honey badger, lillie fiend, etc) gives no shits about your politics.

Go figure?

Saylor is a bitcoin marximalist, he believes in Bitcoin judging from the amount of bitcoin he owns, one would not be wrong to call him a whale. Saylor isn't an early investor to bitcoin. He started getting involved in Bitcoin in 2019 nevertheless he talks about Bitcoin a lot on the media. Microstrategy is not the only company buying bitcoins, Grayscale is on top of the list. Tesla CEO, Elon Musk is a crypto fan his tweets about doge made the crypto famous.

"marximalist"? Is that a new term I missed?

If not, can it be a new term, please?

My own little contribution to bitcointalk.  dastardleek I want my royalties if this blunder gets popular as hodl

Hopefully, it does not get too popular because it seems to be a distraction.

 

[jaysabi]

It looks like they are following a pattern, basically because the price has been trending up since they bought their first stash.

I'm an advocate of buying a small amount of bitcoin regularly but being able to HODL what you have bought for multiple months or even multiple years depending on your end game with the budget you set yourself.

So, there are two questions:  Is the MicroStrategy strategy of seemingly regular purchases an up-scaled version of what I wrote above?  And, if so, what is MicroStrategy's end-game for the coins?  (i.e. dump at a given price?  Dump on a given date?  Or just HODL indefinitely?)

MicroStrategy is employing the same dollar cost average strategy, just on an obviously much larger scale.  They convert excess cash to bitcoin on a regular basis, and then have done pretty frequent offering of stock or bonds to raise big chunks of cash to also use to buy bitcoin.  As far as their end-game, they say they're using bitcoin as a treasury asset, which implies not holding indefinitely, as excess balance sheet assets are traditionally used to grow the business or paid out to stockholders in the form of dividends or stock buy backs.  MicroStrategy continues not to fit the traditional mold though.  I would expect that if bitcoin stopped appreciating in value for a prolonged period of time, this would factor greatly into their future plans.  But as long as it slowly pushes new highs and the business doesn't need cash to grow, there's no immediate reason to sell.

[Daltonik]

MicroStrategy today announced that MicroStrategy Cloud for the government has received the designation "in the process" of the Federal Risk and Authorization Management Program (FedRAMP). Full authorization and certification under FedRAMP is expected before September 2022. "Our fully managed cloud service is the first fully containerized business intelligence and analytics solution awaiting FedRAMP certification, and we are pleased that our federal customers will soon be able to take advantage of it," said Rick Nelson, Senior Vice President, Government for MicroStrategy.

The MicroStrategy Cloud platform is built on a reusable object oriented semantic layer designed from the ground up to meet the most complex and high-performance data security and privacy requirements.

https://www.microstrategy.com/en/investor-relations/press/microstrategy-deepens-commitment-to-us-federal-sector-with-the-fedramp-in-process-designation

[jaysabi]

The bizarre thing is that GAAP accounting rules require them to book a profit or loss on the unrealized gains (it's called mark-to-market) on a quarterly basis, but as these gains are unrealized there is no tax implication associated with them.  

If I'm not mistaken (and I'm by no means an accountant), most corporations don't have to use mark-to-market accounting.  Financial companies do, or often do, but I'm not sure if MSTR is required to.

The reason I'm chiming in about this is because I remember reading a history of Enron, and Jeff Skilling was lobbying the company to use mark-to-market because it would allow Enron to value its assets however it wanted to (and they often overvalued the ones that were hard to value in order to inflate their balance sheet).

In any case, if a company is using that method of accounting, there's nothing really bizarre about having to report a profit/loss on a quarterly basis.  That's the whole point of m-2-m.

No, the rule by FASB affects all companies that issue public accounting reports as part of a regulatory regime and has to abide by FASB rules.  The rule, called ASU 2016-01, was implemented in 2016 and went into effect in 2018.  From the rule release, they address who is affected up front:

Who Is Affected by the Amendments in This Update?
The amendments in this Update affect all entities that hold financial assets or owe financial liabilities.

It's not limited to "financial" companies by any stretch, as you can see it was written so broadly as to involve literally every company that "[has] financial assets or owe financial liabilities."

And yeah, reporting unrealized gains in your company's cash flow makes your cash flow metric meaningless for obvious reasons because it includes gains and losses as "net income" for assets you haven't sold.  It's kind of a big stupid deal if you ask me.  For what it's worth, Warren Buffet agrees, writing to shareholders in a 2017 letter:

“The new rule says that the net change in unrealized investment gains and losses in stocks we hold must be included in all net income figures we report to you. That requirement will produce some truly wild and capricious swings in our GAAP bottom-line… For analytical purposes, Berkshire’s ‘bottom-line’ will be useless.”

[jaysabi]

I will concede that my point might come off as quibbling about a minor thing, but there is something specific and special about bitcoin that has lured Saylor into it.. and to cause his company to supplement its focus onto bitcoin, and maybe at some point, the company moves away from other aspects of its business, even though I believe that their software portion does remain quite profitable, but maybe even that part of their business ends up getting more intertwined with bitcoin, since Saylor surely does seem to appreciate the value in attempting to be creative in various ways to incorporate bitcoin into what he and his company is doing.....

Nah, Microstrategy was a dying company before Bitcoin.
And now it's a dying company holding a large chunk of coins.
As far as I know MSTR was a company with no profit, or even results or any type to justify their activity.

Now they are devoting all of their resources to service their bitcoin investment and knowledge, in order to make new commitments to the orange coins. The actual activity hds been degraded to ancillary to this business.

MSTR was profitable but revenues were declining prior to getting into bitcoin.  While it certainly not healthy to have declining revenues for multiple years in a row, I wouldn't categorize them as being so bad that they were "dying."  But they certainly weren't on the up and up, however severely you want to categorize that.

FY         Revenue (thousands)     Net Income (thousands)
2017      504,543                        17,643
2018      497,638                        22,501
2019      486,327                        34,355
2020      480,735                        -7,524

Over the four years prior to bitcoin, revenue dropped just under 5% but was dropping slowly and consistently.  They definitely needed something to make them relevant, and Saylor very keenly recognized bitcoin was it.

[Daltonik]

Against the background of the rise in the price of bitcoin, MicroStrategy doubled its funds invested in bitcoin, to be more precise, they increased 2.2 times when the BTC price reached $ 60,000.

[fillippone]

A very interesting panel with Micheal Saylor and MSTG CFO about their decision to invest in bitcoin:

In August 2020, MicroStrategy took the innovative approach of adopting bitcoin as its primary treasury reserve asset. It was the first publicly traded company to pursue this strategy and to date has acquired and holds ~114,042 bitcoins acquired for ~$3.16 billion at an average price of ~$27,713 per bitcoin. Join this conversation between CEO Michael Saylor and President Phong Le as they assess the bitcoin strategy over the past year and discuss how other organizations can benefit from this growing trend.

Speakers:
Michael Saylor, MicroStrategy Chairman & CEO
Phong Le, MicroStrategy President & CFO

#bitcoin; #cryptocurrency; #microstrategy

This broadcast is part of MicroWorld 2021. To register for the full event, please follow the link below.

https://www.microstrategy.com/en/reso...

0:00 Introduction & Keynote Panelists
1:15 Why did we invest in Bitcoin?
7:13 Our Bitcoin Strategy over time
10:02 The World’s Hardest Money
12:26 Power of Scarce, Digital Property
16:05 Bitcoin in the Public Sector
17:34 Digital Energy
19:34 Why should the government care?
21:06 Property Rights
23:09 Bitcoin is Hope

As we were discussing profitability of MicroStrategy, of course we have an elephant in the room here. But also, who remember that Berkshire Hathaway was a textile company after all?

[JayJuanGee]

I will concede that my point might come off as quibbling about a minor thing, but there is something specific and special about bitcoin that has lured Saylor into it.. and to cause his company to supplement its focus onto bitcoin, and maybe at some point, the company moves away from other aspects of its business, even though I believe that their software portion does remain quite profitable, but maybe even that part of their business ends up getting more intertwined with bitcoin, since Saylor surely does seem to appreciate the value in attempting to be creative in various ways to incorporate bitcoin into what he and his company is doing.....

Nah, Microstrategy was a dying company before Bitcoin.
And now it's a dying company holding a large chunk of coins.
As far as I know MSTR was a company with no profit, or even results or any type to justify their activity.

Now they are devoting all of their resources to service their bitcoin investment and knowledge, in order to make new commitments to the orange coins. The actual activity hds been degraded to ancillary to this business.

MSTR was profitable but revenues were declining prior to getting into bitcoin.  While it certainly not healthy to have declining revenues for multiple years in a row, I wouldn't categorize them as being so bad that they were "dying."  But they certainly weren't on the up and up, however severely you want to categorize that.

FY         Revenue (thousands)     Net Income (thousands)
2017      504,543                        17,643
2018      497,638                        22,501
2019      486,327                        34,355
2020      480,735                        -7,524

Over the four years prior to bitcoin, revenue dropped just under 5% but was dropping slowly and consistently.  They definitely needed something to make them relevant, and Saylor very keenly recognized bitcoin was it.

It is nice to see the numbers juxtaposed to each other.  I am a bit bothered by the way you characterize Saylor's getting into bitcoin as if it were some kind of desperate move - and really even if you are not completely inaccurate, the framing seems a bit dismissive of nuance.

Even Saylor has said several times that his position has evolved and he has gotten more and more bullish about bitcoin.  In other words, he first came into bitcoin with a kind of defensive position not to lose value and he was learning along the way, and the longer he was in bitcoin the more and more bullish that he became about bitcoin. 

Surely, to outsiders and no coiners, Saylor probably appeared as overly zealous bull right from the start, but I personally have no doubt to accept his representations that he became more and more bullish (and aggressive in the way that he invested into bitcoin) with the passage of time. 

[oHnK]

I will concede that my point might come off as quibbling about a minor thing, but there is something specific and special about bitcoin that has lured Saylor into it.. and to cause his company to supplement its focus onto bitcoin, and maybe at some point, the company moves away from other aspects of its business, even though I believe that their software portion does remain quite profitable, but maybe even that part of their business ends up getting more intertwined with bitcoin, since Saylor surely does seem to appreciate the value in attempting to be creative in various ways to incorporate bitcoin into what he and his company is doing.....

Nah, Microstrategy was a dying company before Bitcoin.
And now it's a dying company holding a large chunk of coins.
As far as I know MSTR was a company with no profit, or even results or any type to justify their activity.

Now they are devoting all of their resources to service their bitcoin investment and knowledge, in order to make new commitments to the orange coins. The actual activity hds been degraded to ancillary to this business.

MSTR was profitable but revenues were declining prior to getting into bitcoin.  While it certainly not healthy to have declining revenues for multiple years in a row, I wouldn't categorize them as being so bad that they were "dying."  But they certainly weren't on the up and up, however severely you want to categorize that.

FY         Revenue (thousands)     Net Income (thousands)
2017      504,543                        17,643
2018      497,638                        22,501
2019      486,327                        34,355
2020      480,735                        -7,524

Over the four years prior to bitcoin, revenue dropped just under 5% but was dropping slowly and consistently.  They definitely needed something to make them relevant, and Saylor very keenly recognized bitcoin was it.

It is nice to see the numbers juxtaposed to each other.  I am a bit bothered by the way you characterize Saylor's getting into bitcoin as if it were some kind of desperate move - and really even if you are not completely inaccurate, the framing seems a bit dismissive of nuance.

Even Saylor has said several times that his position has evolved and he has gotten more and more bullish about bitcoin.  In other words, he first came into bitcoin with a kind of defensive position not to lose value and he was learning along the way, and the longer he was in bitcoin the more and more bullish that he became about bitcoin.  

Surely, to outsiders and no coiners, Saylor probably appeared as overly zealous bull right from the start, but I personally have no doubt to accept his representations that he became more and more bullish (and aggressive in the way that he invested into bitcoin) with the passage of time.  

First of all, I want to thank you for correcting my wrong opinion @Jayjuangee and @Fillippone and without being supported by good data. After looking at the data presented by @Jaysabi, I just realized that there has been a continuous decline in revenue even if we graph the lowest decline in 2019. In terms of productivity, this means that 2019 is the lowest point MSTR generates revenue for the products/services they offer to the public. . Then when compared to Net Income which continues to increase, this increase must have a reason because if I only have that data, I am a little hesitant to conclude. I don't understand how to access MSTR's financial statements for free. Can someone tell me here? If based on the data, I think why the net income in 2020 is the lowest it could be because of the rising costs and if it is said that the net income is minus due to the purchase of BTC then the purchase or investment decision in their financial statement will be clearly stated.

[fillippone]

“Turkey can go and buy $ 5 billion worth of Bitcoin from their central bank treasury, and then it will be worth $ 50 billion over the next five years. This could strengthen their currency, and 50 million people in Turkey would, in effect, have the Turkish Lira, which would be a Bitcoin derivative. "

 

I don’t know if the example is on purpose or not, but actually Turkey has been a constant buyer of gold reserves during the last months. They could easily switch their initiative to digital gold!

[Lucius]

It seems to me that Saylor was completely wrong in choosing Turkey as an example of a country that should invest in Bitcoin, and here I am thinking primarily of the official attitude of that country towards cryptocurrencies in general. I remember that about half a year ago they banned the use of cryptocurrencies in the sense that you can't pay with them -> Turkish Central Bank Forbids use of cryptocurrencies as a mean of Exchange.

I personally don’t see Turkey as a serious candidate to make one such move, but politicians love money, maybe if someone put a bug in their ear, who knows, maybe.

[JayJuanGee]

It seems to me that Saylor was completely wrong in choosing Turkey as an example of a country that should invest in Bitcoin, and here I am thinking primarily of the official attitude of that country towards cryptocurrencies in general. I remember that about half a year ago they banned the use of cryptocurrencies in the sense that you can't pay with them -> Turkish Central Bank Forbids use of cryptocurrencies as a mean of Exchange.

I personally don’t see Turkey as a serious candidate to make one such move, but politicians love money, maybe if someone put a bug in their ear, who knows, maybe.

I would not consider that a country being "hostile" to bitcoin as a matter of excluding them from coming around to "see the light" regarding bitcoin as an investment thesis.

Surely there are problems if governments or government officials are perceived as corrupt and they are planning to bring in bitcoin in order to make money for themselves and to screw the people.  I do not consider governments to be corrupt if they are wanting to make money in order to benefit the people.. and maybe even to build political points for themselves.. but if they are going to be very corrupt in terms of actually stealing public money.. that would be a problematic area that surely can be present in some governments and some cultures in which they might have greater tendencies to use political vehicles to steal value from the people. 

Another way of saying it might be that I am not bothered by a little bit of stealing because I am not anti-government, but there are some kinds of going way overboard that some personalities gravitate too much towards corruption and robbing the people.

Bringing it back to bitcoin, there are a variety of ways that countries could start to bring bitcoin into their systems and into their treasuries, as Saylor was asserting, that could end up being valuable to their countries and their people and likely even to themselves as politicians - so the overall idea is surely not bad - even though the way the matters play out can vary quite a bit based on how any poor governments might end up attempting to play the bitcoin card (if they were to go down such a path).

By the way, at the time of this post, I have not yet looked at the BCT (Fillippone) thread that you linked above.. I intend to go through that thread in the coming days (or when I get a chance.. maybe it will change my mind about some points that I made?  not sure.).

[The Sceptical Chymist]

I don’t know if the example is on purpose or not, but actually Turkey has been a constant buyer of gold reserves during the last months. They could easily switch their initiative to digital gold!

Oh, man....I don't know if Saylor's idea is a good one, even if he and his company have made a killing since investing in bitcoin.  He's basically saying that a country's bitcoin investment could be multiplied by 10 in 5 year's time, and while that could be true, we all know how volatile it is and, if we're being honest with ourselves, we don't know what the future of bitcoin is going to be. 

Gold has maintained a fairly stable price over the years, whereas bitcoin has only existed since 2009 and it's not unheard of to drop in valuation by 50% or more in a very short time period.  I just don't think it'd be wise for governments to invest heavily in it.  Saylor is saying (without actually using the words) that countries should engage in currency speculation because they stand to make massive profits--but these are governments we're talking about!  The money they have is used for all types of public goods and services, and many countries just can't afford to gamble (there, I said it) on a cryptocurrency that's notorious for its stomach-wrenching price swings.