Bitcoin Is The Only Digital Scarcity, Backed By The World's Most Secure Computer Network

He is the Chairman and CEO of MicroStrategy, joins us yet again, and his name is Michael

Sailor.

Michael, nice to have you with us.

Yeah, thanks, Travis.

Always.

Listen, let's just start off on, we just said it.

I think it's 129,000.

Roughly, coin, average price of $30,700.

We spent about $4 billion on it.

One would anticipate if the price stays where it is, that's going to cause a significant

right down overall.

At least your auditors may ask for that.

And you've talked for years about the financial flexibility owning all that Bitcoin gives

you.

I wonder if you believe it also works in reverse.

Now I think it's been a net positive.

We back tested our strategy against every other alternative, but if you roll the clock

back to August 10th of 2020 when we embarked on this journey, Bitcoin's performed 10X

better than anything else.

Gold's down 10% NASDAQ is flat.

Bitcoin is up 86% since that time.

For any time frame, two years, four years, eight years, Bitcoin's the best performing asset.

I can't come up with a better idea.

You can't come up with a better idea.

Does that mean that you would actually consider buying more at these prices?

Yeah, I think if you think about Bitcoin, if your time horizon is one month, it looks

like a volatile risk asset.

But if your time horizon is 10 years, it looks like a risk off store of value asset.

So the crossover point is four years.

These ever lost money investing in Bitcoin for four years.

And if you want to surrogate for the book value of the Bitcoin network, it would be the

four-year simple moving average.

The simple moving average of Bitcoin over four years is about $21,685.

Bitcoin's only touched that point a couple of times in its history.

Including right now.

It's been great buying opportunities.

Right.

Yeah, all right.

We're touching that price right now.

It's funny you should mention it.

So is it a great buying opportunity?

Absolutely.

Bitcoin's backed by the most powerful secure computer network in the world.

If I gave you $100 billion, you can't reproduce it.

And it's beyond a nation's state attack or corporate attack.

So once you understand that and the fact that it's a singularity, there is nothing like

it in the world, then yeah, this is an ideal entry point to get into this thing.

All right.

You've also taken on debt in order to actually accrue that position, which does incur a certain

amount of risk, doesn't it?

I mean, I know you've got six and 1.25 senior notes.

They're in a 2028.

You've also got maturities that are out there.

But there's concern in the market about margin calls, about collateral calls, certainly on

some of this debt.

Can you clarify for us exactly what those are under the governance that you currently

have and how they may impede your financial flexibility?

Yes, sure.

On a multi billion dollar balance sheet, we've only got a $200 million loan that we have

to collateralize.

And we're 10X over collateralized on that right now.

If the market traded down by a factor of 10, we've got cash and we generate cash flow.

So this has all been the margin call thing as much to do about nothing.

It's just made me Twitter famous.

So I appreciate that.

And the Twitter trolls love to beat up on me because it gets them engagement.

As for the company's balance sheet strategy in general, we borrowed $2.2 billion at a blended

interest rate of 1.8% before interest rates doubled.

Junk bond index is from 426 basis points to 820 basis points.

Mortgage rates have doubled.

If you had a chance to grab $2 billion at 1.5% interest, it seems like a reasonable thing

to do.

And I'm glad we did it.

Most of it is unsecured debt.

1.7 billion of it is unsecured.

The 500 million comes due in seven years after we borrowed the money.

So we feel like we have a fortress balance sheet.

We're comfortable and the margin load is well managed.

All right.

Well, you mentioned being Twitter famous.

I should add that you helped make me that as well because we had an exchange in May

of 2021 that was viewed some, I don't know, 800,000 times.

I want to play it for you, Michael, because it's instructive to get you to listen to it

now and respond again to some of the same things that you discussed then.

Take a listen.

You do understand how much risk you're taking on here, don't you?

There's something solid there.

I mean, Bitcoin is an idea that's worth.

It might have been risky 10 years ago, but how long do you have to watch something spread

like an idea of virus before you decide that maybe it's going to be around for a while?

So again, you're just, you're comfortable taking this continued risk that we're talking

about.

You know, the biggest idea here is Bitcoin is the first and the only legitimate scarcity

in the universe.

Gold is not scarce.

They just found 320,000 tons of gold in Uganda, which would double the supply of all

gold, mind, since the history, the beginning of mankind.

So Bitcoin is the ideal commodity because you can't make any more of it.

You can hold it forever and it's programmable.

And as I said before, if I gave you hundreds of billions of dollars, you can't recreate

the network.

So we see it as unique as a long-term store of value.

And it's a commodity in property.

We couldn't do this strategy with a security like the S&P index.

And it doesn't make any sense to do it with single-family homes, which have underperformed

as well.

So, yeah, we stand by the decision and we think that 98% of the world doesn't understand

the concept of a digital scarcity yet.

But when they do, they're going to think it's a magical thing.

Michael, you mentioned this sort of four-year average as proxy for some kind of intrinsic

value to the Bitcoin network.

This thing's only existed for a dozen years, right?

I mean, the four-year value, it doesn't seem like something that has some kind of statistical

big significance to it that we're going to rely on.

I mean, maybe it's worked on the chart.

But to me, to say that's something like book value is a little tough.

Well, the idea here is, Bitcoin's a bank in cyberspace and people buy Bitcoin to store

their monetary energy forever.

Micro strategy put $4 billion into the network and we got less than 1% of the network,

like 75 basis points or something.

So if you think about how much money collectively has been invested by the Bitcoin hotlers,

it's looking like the book value in networks, 450 billion are so if you look at the daily

deposits in the network day after day over the course of the last four years and people

tend to hold on to that forever.

So I think it's a pretty good surrogate for the monetary energy invested in the network

and because there's its unique and there's no other alternative network, you can move

it to people that have put that money into the network or committed for the long term.

I guess the other question is, a lot of people have kind of looked at the price action

and looked at the asset attributes of Bitcoin and other crypto and said that's really

kind of just running in parallel to what's happening on the technology side.

So maybe there's no right or wrong price for the coins but there's something underlying

it that's going to be the next version of the internet or whatever and this is the raw

material for it.

You don't really seem to be in that camp.

You just think this is the stuff to own because it has the scarcity properties.

Look at every commodity in the world has looked kind of good in a hyperinflation environment

but the dirty secret is you can make more oil, you can make more silver, you can make

more gold, you can produce more corn, you can even create more real estate.

Bitcoin is the only thing that looks like a commodity that is scarce and capped and in

the crypto world, look the crypto world is 19,868 likely unregistered securities, one digital

commodity called Bitcoin and so this Bitcoin is unique because of its provenance and because

of the Bitcoin mining network backing it and because of the protocol, there's nothing

like it in the analog world and there's nothing like it in the crypto world.

But to Mike's point about the short shelf life Michael and the limited history we have to

go on, what do you say to those who argue it's been incubated in a period, a long period

of cheap money and stimulus and money growth and M2 growth and that if that era ends,

why should the price appreciation have anything to do with its short history?

The price is appreciating because there's a fundamental need for 8 billion people in

the world to have a store of value of their economic energy that is beyond the reach of

a corporation or a government and that cannot be debased by any individual institution or

nation state.

In the 19th century that dream was the gold dream and in the 21st century that dream is

Bitcoin and it's not hard to go find someone on the street that wants to find a way to preserve

their life savings without it being stolen by a bank or debased by a government and so

Bitcoin meets that need, nothing else in the world meets that need.