Welcome back to Scott Box this morning.
Bitcoin crossing the $70,000 mark for the first time on Friday this morning.
It's now above $72,000.
Join us right now to talk Bitcoin is Michael Seller,
Micro strategy executive chairman and AK out from the company this morning.
We're revealing it just bought more than $800 million in Bitcoin.
As of the end of last month,
this company held about 200,000 Bitcoins.
And Michael, I want to thank you for joining us.
You have been early and courageous and you continue to double down.
I want to talk about where you think Bitcoin is,
but also want to talk about how you think about a micro strategy.
Your company has a proxy for Bitcoin.
Now that ETFs are available to the public.
Sure. Well, I think I'd start just with Bitcoin.
Bitcoin is certainly at least digital gold.
It's going to eat gold.
It's got all of the great attributes of gold.
And it's got none of the defects of gold.
If you could teleport goal from New York to Tokyo in a few minutes,
people would like it.
It's going to divert capital from risk assets and risky ETFs like SPY.
And you can see that these ETFs are doing that.
It's going to be incorporated into a lot of funds like the BlackRock Global Opportunities Fund
or the Strategic Income Opportunities Fund.
And so it's an asset class.
As it goes into other funds, it's going to become structural.
The halving is going to cut the organic supply of natural sellers
in half around April 20th.
That means there's only about $31, $32 million a day of natural sellers.
And the price of Bitcoin is going to have to adjust up
in order to meet that investor demand.
So I think that's what's going to happen next to the asset class.
In terms though of how investors should think about your company.
And right now I think they think of your company as a proxy for Bitcoin.
It was a way for investors, frankly, who didn't want to buy the underlying coins
to get access to Bitcoin and exposure to Bitcoin.
The question now though that these ETFs have been approved and folks are funneling money
towards BlackRock and so many others, how should they think about your company versus doing that?
Yeah, so BlackRock is like the container ship or the super tank or a Bitcoin.
They can take a billion dollars a day into their capital structure.
And they can haul that very efficiently, 25 basis points.
Microstrategies like Air Freight, we get higher performance.
So what's going on here?
Microstrategies got leverage.
If we borrowed $800 million at 62 basis points,
is there any company in the world that you wouldn't like to invest in
that could borrow a billion dollars, a less than one percent interest to invest in your best idea?
So we get that very intelligent leverage.
It's a non-recourse, it's unsaccured.
And then we buy Bitcoin with it.
That leverage gives us volatility.
It gives us performance.
The performance gives us volatility.
The volatility attracts capital.
And we can then leverage more.
It's kind of intelligent because it's convertible debt.
It's given our shareholders more Bitcoin per share this week
than they had a few weeks ago.
So it's very accretive for them.
And it's pretty compelling for every investor.
If you're Bitcoin curious right now and you want to buy Bitcoin at the all time high,
how do you get the upside in Bitcoin with downside protection?
Microstrategies sold 800 million in debt and we have
12, 13 billion dollars of Bitcoin on the balance sheet.
So we're giving you an over collateralized loan and the upside.
But if you're a Bitcoin maximalist and you love Bitcoin and you want to hold it forever,
the ETFs charge you 25 basis points.
Microstrategies are creating.
We're giving you a yield against your shares and a tax-efficient fashion.
So the maximalists like the equity, the hedgers,
they kind of like the upside with downside protection.
The traders love the vol.
We've got 100 vol asset here and they just like the vol.
So we're unique because you can't really trade options on the ETFs.
And an ETF isn't going to issue a convertible bond with upside to Bitcoin but downside protection.
So Michael, I try to understand the mathematics and I know people like you,
you want MIT and it just seems
maybe it's more understandable for you or Andrew soon or Peter Teele or whatever.
At 17 down from 68 and you know your level of your leverage and everything else,
did you ever wake up in the middle of the night and have any doubt what so ever?
That's my one question because I was thinking about you at 17,000 and now I look at it now and it's
I just can't believe what the mark cap of your company is based on it now.
I guess and the other thing is when it has, should we,
if we look at it on stock to flow, do we have to just double what the potential prices
based on if you use that metric, is that a valid metric to use?
And after the having, shouldn't it be 140,000 immediately if it's worth 72 now?
Two good questions and thanks for asking me.
First, with regard to Bitcoin, no, there's no doubt in my mind, Bitcoin was a better investment at
17,000 than it was at 65,000. I take the Warren Buffett view on this. Bitcoin's a superior investment
to gold, equity bonds and real estate because it's digital. You can trade it a million times faster
than conventional assets using a computer. It's available. Most other assets only trade less than
20% of the time. Bitcoin is trading 168 hours a week. We bought $800 million of Bitcoin and a lot of it
we bought over the weekend when all the conventional markets are closed. It's global. It's the most
widely recognized and trusted investment asset in the world right now. It's ethical because
it's the king of all commodities. There's no issuer. There's no company. There's no country controlling
it. Fundamentally, it's useful. Thousands of market makers can trade it all the time. Millions of
companies can trade it. Billions of people. If you want to buy a house on Saturday in Africa,
this is the way to do it. If you want to buy a car on Sunday morning, this is the way to do it.
It's a pretty great asset. It's the greatest of the assets in my opinion. There's no second best
asset. I didn't have any question about it. We're just waiting for the rest of the world to realize
how good it is. As for your second question, the having, look, the selling in the market for the
past month has been primarily bankruptcy estates that are liquidating GBTC at FTX or Genesis or the
like. Once they got done rebalancing, the natural sellers are the miners. The miners can only sell
900 Bitcoin a day right now. They're only going to be able to sell 450 Bitcoin a day coming the end
of April. As long as there's more demand in the market than the 450 Bitcoin a day, there isn't any
catalyst to drive this asset down. It has no cash flows. The critics think that's a defect. It's a
feature with no cash flows. No quarterly results. No product cycles. This is the long as lived asset
in the financial ecosystem with the least uncertainty. We're buying it to hold it a hundred years.
So that being the case, that 66 to $16,000 crash that shook out the tourist that shook out the
non-believers. When it was 16,000, we were all ready to ride it to zero. That's what you'll find
with with the Bitcoin maximalist. Now we're riding at the other direction and the protocols working,
working to everybody's benefit. There's just no reason why it shouldn't just keep adjusting up to
find the marginal supply as the demand builds. Your market cap, Michael, is about 24 billion. You
mentioned you got about $15 billion in Bitcoin on the balance sheet. So the substantial part of
your market cap is now Bitcoin as opposed to your core software business. There's a software business
that's solely so you can borrow off of that in order to buy Bitcoin. And how can we understand
right now the health of your business as you undergo transition of customers to cloud-based
software? We have now rebranded ourself as Bitcoin development company, think like a real estate
development company. And certainly the substantial amount of our enterprise value is based on our unique
ability to issue securities and to purchase Bitcoin with convertible debt, with equity, and the like.
And so we understand that. But the only reason we can make this transition is because the software
business was healthy. It does generate steady cash flow. It does allow us to issue debt to issue equity.
It does make us unique because we're able to we've got a very functional options market. We've
got a very functional debt market. And we've got a very stable operating business that we can use.
If you look at our last result, we actually bought a lot of Bitcoin with operating cash or cash
out of the operating business. And that is purely a creative to our shareholders. So we think we're
unique and that's working very, very well right now. Hey Michael, do you think long term
that there's any risk at this point has Bitcoin reached such escaped velocity that there's any risk
that governments, the US government and these government other governments somehow do something to
Bitcoin that puts its growth in jeopardy. You know, it's another great question Andrew. A lot of
times the skeptics they say Bitcoin looks too good to be true. It's so good to be true. Someone's
going to take it away from you. And that's based on a fundamental misunderstanding about Bitcoin.
People refer to it as currency or digital currency and that's unfortunate historical artifact.
It's not digital currency. It's digital property. And once you make that big leap, but understand
it's property, you see the compelling use case is capital preservation for everyone in the world.
There's no there's no anathema associated with owning property. You can own a billion dollar
building in New York City. You can own a every place in the world where they allow you to own property,
which means China, Europe, the US. They're going to embrace Bitcoin as digital property. All the
controversial issues around around cryptos have to do with their use as a medium of exchange.
But what I'm here to say really is medium of exchange is only worth the trillion dollars.
Store and value is worth a hundred trillion dollars. So I give your company, I give your family,
I give your institution a billion dollars. I drop you in Africa and I say, you got to save the
capital for a hundred years. What are you going to buy? And the answer is nothing. There is nothing
on the entire continent you can buy that's better than Bitcoin. So Bitcoin's going to be embraced
as property. It's going to be controversial if people think of it as a currency. So I would
encourage people to think of it as digital property. A billion dollar building in cyberspace.
100 years. Does it ever have to be a currency or do you think it ever becomes a quote unquote
currency? It doesn't have to be a currency. Nobody's trying to buy a cup of coffee with a fraction
of their building on fifth avenue. But every rich person I know owns property in London or
New York City or somewhere. And none of them complain about not being able to spend their building
as a medium of exchange. So the killer application is capital preservation for everybody.
The store of value is the killer use case. Medium of exchange is a distraction.
Governments are always going to issue currency. They're always going to make it legal tender.
And that's just fine. Bitcoin's competing with gold. It's going to eat it. And then it's competing
with risk assets as a long term hold and it's competing with you buying an Airbnb as a retirement
income source if you're a middle class person. Michael I want to thank you for joining us this
morning. Really appreciate it. And before we talk to you again very very soon. Thank you.
Yeah thanks for everything.