Bitcoin Provides a Sound Economic Foundation for the Cyber Economy

For a longer-term look at crypto, though, let's bring in Michael Sailer,

MicroStrategy CEO, who of course has been a long-time proponent of the cryptocurrency,

holds it on the company's balance sheet, et cetera.

Michael, it's good to see you.

Let's talk about the recent action.

I'm also, of course, caught my attention.

The comments from FTX's Sandbank been freed in the FT over the weekend,

where he talked about that Bitcoin is not really going to be

a viable transaction mechanism, even if it can still be a good store of value.

Does it need to be a good transaction currency in order to reach some of the heights

that folks such as yourself have talked about?

I think Sam left off mention of the Lightning Network.

It's pretty clear that Bitcoin's the future of money and lightning is the future of payments.

And if you're going to do payments and transactions high speed,

you're going to need a base layer that's ethically sound, economically sound,

and technically sound, and that's what Bitcoin is.

But then billions and billions of transactions are going to go on a layer

to like lightning, which is an open, permissionless, ethical protocol.

Or they're going to move on layer threes, like cash app or PayPal or Apple Pay

or Visa or Mastercard.

Those are our securities.

They're companies that are custodians that are moving payments back and forth.

So I don't know why Sam left that off, but it's pretty obvious to every Bitcoin

or that payments are going to take place on layer twos and layer threes.

And so for the holdings though, at this point that you've been able to amass over the years,

one huge thing that sticks out in terms of the crypto winter that we're in right now

versus the one prior is the number of larger companies that have holdings such as yours.

Is there a certain price target at which you would have to start liquidating some of those holdings?

No, we're going to, we're in it for the long term.

Our strategy is to buy Bitcoin and hold the Bitcoin.

So there's no price target.

I mean, I expect we'll be buying Bitcoin at the local top forever.

And I expect Bitcoin's going to go into the millions.

So we're very patient.

We think it's the future of money.

So you don't sound like you have wavered whatsoever.

Michael, as we have seen this downturn in price, of course, we've seen downturns in price before.

Is this one different at all?

Is there is there any doubt in your mind when you watch the action that we've seen over the past few weeks?

I think that the entire crypto crash has made a couple of things clear.

First of all, there's one perfect thing that's Bitcoin.

That's a decentralized ethically sound, technically sound, economically sound money.

There's a bunch of imperfect things.

There's the stablecoin, the USD circle and tethers and BUSD and et cetera.

Everybody wants a stable US dollar.

They're struggling with how to do it in a compliant fashion with transparency.

Then there's a lot of dangerous things.

There's 19,000 dangerous things.

It's basically all the unregistered security crypto networks running on proof of stake

that have active management, project management teams that have ICOs that have some centralization in them.

Luna and USD was an example of one of those crypto security tokens that was mismanaged.

It blew up.

What's going to happen is an entire generation of crypto people are going to get educated on why Bitcoin is the superior asset.

A bunch of regulators are going to accelerate their regulation of stablecoins and accelerate their regulation of the crypto security tokens.

The winner of that entire exercise is Bitcoin because once people figure out why Bitcoin is superior to everything else,

then the institutions are going to come in with large sums of money.

We're not going to have to struggle through this massive explaining why we're different than 19,000 other crypto tokens.

Just quickly, Michael, just to be clear here, you traditionally have been a Bitcoin maximalist, so to speak.

To be clear, you weren't invested in things like Terra or Luna.

Are you in any of the stablecoins?

First of all, Luna is not a stablecoin, but we wouldn't invest in an unregistered security.

99.9% of everything in the crypto space is an unregistered security.

I might invest in a registered security one day.

If you ask me what I buy Apple stock or Google stock after reading the 10K and 10Q disclosures, maybe, maybe not, but that's not our strategy.

I really don't think that any public company or public investor can invest in an unregistered security.

That's venture capitalists.

No, we're not invested in it.

It's pretty obvious that they're all unregistered securities.

I think the crypto industry hasn't really addressed that issue.

That's the elephant in the room.

The Luna Terra meltdown has actually brought this to the forefront.

I don't think people can ignore it.

Michael, there's been some stories recently.

I think Fortune ran with this one.

If Bitcoin falls below 21,000, there might be some form of margin call over at your company.

What does that mean? Help us understand what does happen if crypto continues to fall.

That's all, Fud.

We started with $5 billion of unpluged collateral.

We borrowed $200 million against it.

That's a loan to value of 4%.

If Bitcoin fell 95% from that number, then we'd have to post additional collateral.

People got their hands around the fact that we would adjust some collateral.

Bitcoin ever got to 21,000, but it's really a non-issue whatsoever.

You can think of it as leverage of 1.04.

If I was leveraged 10 to 1, we would have borrowed $50 billion against that collateral,

but we borrowed $200 million.

It's really a nothing issue.

What type of regulation do you expect to come over the course of this year

as we've increasingly heard Bitcoin and broader digital assets discussed acceleratingly in Washington?

How does that impact where you would add on to your existing crypto positions?

First of all, we won't add on to crypto positions.

We will add on to our Bitcoin position whenever we come into excess cash.

That's a very simple strategy.

With regard to regulation, there's been a deadlock in DC and on Capitol Hill

around stablecoin regulation and around security token regulation.

I think the administration wanted to move faster.

Congress was moving slower.

I think that this meltdown of Luna, UST, that's going to accelerate the regulation of stable coins and security tokens.

Which will be a good thing for the industry.

Michael, finally, getting back to price for just a second here.

Do you think that Bitcoin will remain in the doldrums as long as the Fed is in a rate raising cycle?

I think that clearly Bitcoin has been drawn down with all the risk assets in this

in this deleveraging tightening cycle.

But there are also the crypto crash issues and the Luna Terra impact.

So over time, I think as people get educated and as they get more comfortable,

I think we'll recover from this drawdown.

Fed policy is very difficult to pin on or to predict.

And so clearly they have a huge impact on how people value all assets depending upon what they say from day to day.

Michael, we certainly do appreciate the time here discussing not just your own holdings,

but the broader landscape as well.

Micro strategy CEO Michael Still.