Regulatory Clarity Is Going To Drive Bitcoin Adoption

Michael Saler joins us now.

Micro strategy co-founder and executive chairman.

And Michael, the reason I pick that sound bite to play

is that I feel like we already have clarity

in terms of the US regulatory regime for now.

Gary Gensler at the SEC seems to want to stop

any crypto companies in their tracks

and either have them close their businesses down completely

or move offshore.

How do you think?

How do you think it's all playing out?

Well, I think Micro strategy's view since 2020

has been that the only institutional grade

investable asset in the crypto space is Bitcoin.

Bitcoin is the universally globally acknowledged

digital commodity in this industry.

I think it's pretty clear that the regulators

don't see a legitimate path forward for cryptocurrencies

like the stablecoins, crypto securities,

like the tokens mentioned.

They don't have any love for crypto derivatives.

They don't have any love for crypto tokens.

And they have a view of crypto exchanges,

which is far constrained.

I mean, their view is crypto exchanges should trade

and hold pure digital commodities like Bitcoin.

And so the entire industry is kind of destined

to be rationalized down to a Bitcoin focused industry

with maybe a half a dozen to a dozen other proof

of work tokens.

So Michael, what happens then to the exchanges?

In the US at least, it seems,

you know, if they're only going to offer trading in Bitcoin

or other, you know, clearly pure commodity tokens,

that's not going to be a great business model.

Do exchanges in the US just go away?

I take a different point of view there.

I think there's been a lot of confusion

because of the 25,000 other cryptos

and because of all of the crypto securities

that have been angling to position themselves

as the next Bitcoin or a better Bitcoin.

So now I think that the public is beginning to realize

that Bitcoin is the next Bitcoin.

The next logical step is for Bitcoin to 10X from here

and then 10X again.

So eventually, I have confidence

that the crypto exchanges will come around to realizing

that Bitcoin really is the dominant asset

in this space.

And their business models are fine

when Bitcoin goes up by a factor of 10.

And, you know, we can see that the dominance of Bitcoin

and the crypto economy as measured by coin market cap

has moved from 40 to 48% this year alone.

But I think that is the stable coins

and the tokens go away.

That long-term dominance is headed for 80%.

And I think what you got to remember is

the reason that we don't have mega institutional money

flowing into this space is confusion and anxiety.

When that disappears, you're going to see mega amounts

of money flowing to space.

And the business models will be just fine,

focused on Bitcoin.

Michael, I want to ask what the future

of some of these centralized exchanges does look like right now

because to your point that maybe once the confusion clears up

more institutions will come in.

When you have a company like Coinbase, obviously

there's a big regulatory overhang right now

for normal investors in the space, not the big institutions.

Do you see them moving away from these sort of centralized

exchanges, maybe gravitating more towards cold wallets

from here?

Well, you know, I think that there is a massive need

for exchanges to help people acquire Bitcoin

and custody Bitcoin, especially as the pension funds,

the insurance companies, the banks,

the institutional investors get into the space.

Companies like GraceGale need to have a custodian.

So I see a lot of bullish things for Bitcoin on the rise.

And I think the accounting treatment, the upcoming having,

the explosion in the half rate, and also the clarity

that has come out of the SEC of late is actually

laying the foundation for the next bull run.

And there is a place for crypto exchanges

to help people buy Bitcoin, sell Bitcoin, custody Bitcoin.

And I don't think that's going away.

I think that's going to be a great business.

Michael, how does MicroStrategy actually accumulate

its Bitcoin and has that process changed at all?

We use a variety of institutional grade Bitcoin companies.

We work with Coinbase and we have work with Coinbase.

We have a number of institutional grade custodians as well.

MicroStrategy has been kind of special in this regard

because unlike, say, an ETF or the like,

we're able to access the Bitcoin spot markets

and hold Bitcoin.

And we're also able to access the equity in the debt markets

as we pursue our Bitcoin acquisition strategy.

How is, I mean, you've outperformed Bitto and GraceGale

and other ET exchange-trader products year to date?

How is your strategy, though,

and your company different from one of these products

that just holds large amounts of Bitcoin?

Well, we're an operating company.

So we have a profitable software business

and so we can sweep the cash flows of our software business

into Bitcoin.

Our aim is to allow institutional investors

to get Bitcoin exposure, but without charging them a fee

and generating a yield when we can.

And because we're able to tap the debt markets,

we're able to issue debt.

We're also able to refinance or pay back our debt

like when we retire our silver gate loan earlier this year.

We're able to issue equity when it's a creative.

We're able to purchase Bitcoin with cash flows when it's a creative.

So those are our flexibility.

You have as an operating company.

If you're an SEC 40 company like an ETP

or like grayscale as a trust,

you can't really do those things.

And I mean, the result is,

yeah, Bitcoin is up 55% this year to date.

Micro strategy is up 92% this year to date.

All right, Michael, I really appreciate your time.

It's great to catch up with you.

That is Michael Saylor.

He is microsagy co-founder and executive chairman.