Strong, Fast and Smart Money - Bitcoin

Let's take a look at crypto prices this morning.

You see, 55,000 now.

Joining us, Michael Seller,

Micro Strategy Executive Chairman.

You have, you've actually, you never stop adding

to the position of your company.

And you have, you have a lot of courage

because there's been a lot of major swings in the past.

And there were times when I was worried,

can you tell me were you ever close to margin calls,

anything ever happening to Micro Strategy?

Well, when Silvergate Bank failed, we had to redeem that.

But it turned out to be a benefit for us.

We made a lot of money on that redemption.

We repaid our Silvergate loan.

But it's been a great journey since August 10th of 2020.

Micro Strategy is bought about $8.3 billion worth of Bitcoin.

And Bitcoin's up 44% a year on average since then.

The S&P is up 12%.

And since we've levered it, we're up 825%.

The number one performing stock in the S&P

is in video up 821% as of Friday.

So we beat every single company in the S&P end

that's using Bitcoin strategy.

Does Micro Strategy now do anything else?

We still run the software business.

And it's generally a cash cow for us.

But our primary business is a Bitcoin development company.

That's what we're doing is we're securitizing Bitcoin.

We're selling convertible bonds for people

that don't want the full volatility

and all the risk of Bitcoin.

Some people want 150% risk, right?

So some people want highly levered equity

and they trade the options.

And so we have a very big, deep, rich options market.

We've got high performance equity.

And then we've basically pioneered Bitcoin-backed bond market

by issuing all of these convertible bonds

that are backed by 5X more Bitcoin collateral.

Has anything changed in terms of you think

the investor class that's investing in your stock

versus now investing, for example, in ETF?

Obviously, one is more levered than the other.

Yeah, if you're investing in ETF,

if you're getting one for one performance

paying 25 basis point fee, no yield,

when we issue a billion dollar convertible bond

paying 1% interest, we're capturing

a 50% premium or 50% type BTC yield on that upfront.

And then we capture another yield on the back end.

So if what you wanted was a tax deferred yield

on your asset or you wanted to tap

into the convertible bond market,

if you wanted borrow a billion dollars for a percent

by Bitcoin with it, hold it for seven years,

you can't do that as an individual,

but micro strategy can do it.

What have you made?

I think I just saw a headline that $1.2 billion

in outflows took place out of the Bitcoin ETF.

And I'm curious to what you think is going on

with the impact of the ETF on the price of Bitcoin?

I think generally it's been a good thing

and it's created more demand,

but you gotta keep in mind that Bitcoin

is smart, fast, strong, money.

So on a Saturday night, if you worried about a missile strike,

you can't teleport your 10 million dollar apartment

to Singapore, lever it up 10 to one,

and short $100 million worth of New York real estate.

But you can short $100 million worth of Bitcoin

by borrowing $10 million.

So you have a lot of fast money traders,

a lot of volatility,

and that will cause and ripple into volatility in the ETFs.

Can you explain this?

Okay, can you explain this?

You know, one of the things you just talked about

if there was a missile strike or something,

there was a sense that people talked about this

is digital gold.

And maybe you still think that's the case,

but it often doesn't act like digital gold

in the midst of a missile strike.

Yeah, it's the most liquid,

fungible, free capital market in the world.

You're in New York apartments, not fungible, it's not liquid.

I can't panic sell it.

So when there's a short term panic,

Bitcoin is trading really, really hard to be the opposite.

Over the long term, it's up 44% a year, every year,

and you either get 12% from the S&P with VIXVOL,

or you take 3X of the VOL that get 44%.

So over the long term, if you're an investor,

it's gonna be great because it's strong capital.

Over the near term, if you're a trader,

you get lots of arbitrage opportunities.

Is it a non-correlated asset people can can on,

or is it just a risk on?

You know, in the near term,

whoever's got the most money can decide whether correlates

or non-correlates is like, again,

I can leverage up 20 to 1 on Saturday night,

and I can trade it long or short.

Hey, Michael, just the whole idea of leverage

and something that is admittedly so volatile,

causes some people some real concern.

I mean, I'm far more conservative.

I would be worried about that.

What's the worst case scenario of something

that would happen in a leverage situation like that,

with the Bitcoin ETF?

I think what happens is people off short trading on Binance

with 20 to 1 leverage get wiped out on Saturday night

when there's a potential missile scare.

And so they're the degenerate crypto traders.

On the other hand, what you want is a free open capital market.

Everybody can trade it any way they want.

And so if you're gonna hold it for more than four years,

you're gonna get superior performance

with that volatility.

Gensler, with all we've seen,

and I wonder what you think,

do you have anecdotal evidence exactly what,

he's thinking in terms of Bitcoin regulation,

given that he, do you think he's done the 100 hours

that you said need to be done to understand it?

And if so, what do you attribute the,

I don't know, he's been unable to stop it

because of the courts, really,

but he certainly tried.

What do you attribute that to?

You know, I think the administration's been

fairly conservative and they're embraced

of the crypto economy.

They want to go slow carefully, deliberately.

But do they want to go, or do they not want to go?

Well, before Gensler entered office,

the rhetoric was even more controversial.

After Gensler entered office,

you heard Jerome Powell,

Christina Lagarde, Gary Gensler,

all say Bitcoin is a speculative digital asset.

And that was actually a move forward.

With the approval of the ETFs,

it was the second move forward.

I think clearly we're all waiting for big banks,

the Bolshevik banks to start to custody and hold Bitcoin.

That'll be the third big shoe to drop.

Do you think that the election matters

and do you believe that Donald Trump

is more Bitcoin friendly than a Biden and Harris?

Well, there's no doubt the Republicans

are taking a very pro-crypto stance.

Republicans are Trump.

Trump is.

And you believe it, don't believe it's a joke.

In particular.

There's a tension between the 21st century and the 20th century.

And the 20th century,

company comes public.

It costs $100 million in four years to go public.

I know I did it in 98.

And the 21st century,

I can create a public crypto token in four hours for a hundred bucks.

So you have a hundred million companies

that want to be publicly trading an asset

a million times cheaper faster.

That's the crypto economy.

The traditional economy is,

if you take four years,

you spend 20 million a year on compliance.

And I think that the two sides are talking past each other.

But clearly, the future is faster, smarter, stronger.

I mean, you know what Senator Elizabeth Warren

thinks about Bitcoin.

I mean, if she becomes a,

I've seen her big jobs.

I thought that-

The political winds have shifted.

And I would say that, you know,

at this point, the Republicans have shifted

to way progressive and the Democrats are drifting to the middle.

In terms of Bitcoin.

In terms of their view toward crypto and Bitcoin.

And let's say that it is in a continuation

of the Biden and Harris administration.

It's against their,

it's taking on a larger role.

It becomes even more.

You know, that's all above my pay grade.

What I would say is,

my view is-

The first year be Treasury Secretary, I mean.

You buy Bitcoin, you hold it for more than four years, Joe.

That's my advice to everybody.

For anyone buy it and hold it for more than four years.

And then you think eventually it takes how much,

let's say it is digital goal.

What percentage of gold's market cap does it finally?

You know, Bitcoin's 0.1% of the capital in the world right now.

I think it's going to go to 7% of the capital.

7% of the capital. My long-term forecast is it's going to go-

To 13 million over 21 years.

13 million over 21 years.

What is it five years from now?

You're four year calculus.

You know, it's been growing 44% of years

with about a 40 to 50 vol.

I would think it'll move on it 40% and click down to 35%

than 30% than 25%.

And at some point it'll be the S&P return plus 8%,

and it'll be the S&P vol plus 8%,

because it's always going to be a more global, open, free capital market.

How is there stuff that's above your pay grade?

You're worth billions.

I mean, we can say that.

It's above our pay grade, but who gets to the side of it's above your pay grade?

You might have been its below his pay grade, right?

Exactly. Exactly.

Bitcoin's an expression in this view that you want to invest

in an asset without counterparty risk,

which means you don't want to be counterparty to a country,

a currency, a city, a company, a commodity, or a culture, right?

So people think it's a risky thing.

It's all about people wanting to not take risk.

They don't want to guess whether Picasso's

or real estate in New York or Nvidia stock will be higher in 10 years.

They want to buy money.

They want to buy $121 million of all the money in the world forever.

And at there, Michael, thank you.

That's great. Michael, thank you.