Economic Benefits Of Bitcoin Scarcity And Volatility

Micro strategy adding to its Bitcoin Horde purchasing $15,400 Bitcoin at about $95,096,000 per Bitcoin for a total cost of $1.5 billion

of the company's executive chairman tweeted, we hodl hodl more than $400,000 Bitcoin. You want us now, Michael Seller,

Micro strategy executive chairman, your average, Michael, it's good to have you in studio again. Your average for those $400,000 is $58,000 per Bitcoin, so it's been moving higher as you keep buying at higher prices.

We bought it about 42 times since August of 2022 today.

In this point, the strategy is to issue stock or convertible debt of Micro strategy and use that to buy Bitcoin.

We're a Bitcoin Treasury company, so we're securitizing Bitcoin. We're providing high performance equity. We're also providing convertible bonds.

We've provided other kinds of bonds in the past, but primarily our job is to bridge the traditional capital markets that want bonds or they want fixed income or they want equity or they want options.

We plug that into the crypto economy and we use Bitcoin as the vehicle to do that.

What percentage of the public do you think understands Bitcoin at this point? I don't know if it helps to go into your strategy, what you just tweeted about, if people don't even understand Bitcoin, and I still see it everywhere that it's air or that it's not like gold because you can't make jewelry out of it.

I still think that because you can't touch it, it can't be real and it can't represent money. Can we go into how you're arbitraging it to make a return?

Here's what you need to know. The S&P is about 15 ARR for the past four years, and the volatility S&P is 15.

If you want to own a commodity like silver or soybeans or gold, they have very low performance less than 15%, 5%, 0%, you don't really want to hold soybeans for 100 years.

And sometimes they have volatility but it doesn't last that long. Bitcoin is 60 volatility, 60 ARR, and it is a legal commodity, but it is an economic scarcity.

It is the only commodity invented in the history of the human race that's absolutely capped.

And so that means you can expect it to keep going up. If I can give you a commodity that outperforms the S&P index, if I can give you a commodity that's more volatile than the S&P index, you can put 100% of your liquid assets in that commodity per SEC rules.

I can't do it with a security by the way. So up until Bitcoin, people had to use gold or real estate as their commodity or they have to use the US Treasury bill, those are all underperforming the S&P and they're less volatile.

Bitcoin is the first thing you can use in your Treasury that's more volatile that outperforms the S&P. The result is, if I give you a security Joe that outperforms the S&P, how much of it do you want to buy?

And if you're an ARR, or an options trader, and I give you an option that is 4X the volatility S&P, or with micro strategy, we're 10X the volatility S&P. How much of it do you want to trade?

So Bitcoin is unique in the history of the capital markets. It's the first scarcity commodity outperforming the S&P, more volatile the S&P that you can put on your balance.

Volatility at some time is not always good thing. I mean it's great when something's going higher. But do you don't think that there'll be a drop or a significant drop that comes along? Have we moved past that because of the regulatory changes that have taken place?

I think it'll remain volatile because it's a 24-7365 global asset. You can panic, sell it on Saturday night. You can enthusiastically buy it on Sunday morning. That's a feature. That's not a bug.

You've lived through some of the swings, but do you think we won't see the downturns we've seen in the past just because of the changes we've seen?

I think it's going to surge through the roof, and then it's going to surge to 180 and crash to 140 and people will be freaking out about it again.

But let me make this one analogy. Volatility is like fire. And some people run away from the fire, but Henry Ford put the fire into a carriage via an engine, created an entire industry.

And he gave humanity wings.

Can we talk about it? I've been leading up to do for me and for everybody to understand your tweet is from I think in the last hour.

So what you do last week with the Treasury operations, you are able to generate a Bitcoin yield of 2.55 percent or over almost 10,000 Bitcoin to shareholders using an arbitrage.

Can you explain it? Will I be able to understand this if you explain this?

We sold one and a half billion dollars worth of stock by 500 million worth of Bitcoin. We bought back 1.5 billion of Bitcoin.

We captured nearly a billion dollar gain in the arbitrage. That we can do with equity day by day. When we do it with debt, we issue $3 billion of debt that's backed by 600 million of Bitcoin.

That comes due in five years. We pay zero percent interest. We buy $3 billion of Bitcoin. We capture the 2.4 billion dollar in the arbitrage gain up front.

But then over the course of the five years, we double or we quadruple the investment because we're buying an asset, which is appreciating faster than the asset.

What you told me was that it's 55 percent premium over conversion, but is zero coupon? Is that so?

That was a zero coupon 55. And you can do that because Bitcoin is high-vol and the companies that have Bitcoin on their balance sheet have even higher volatility.

So, Merra is a great example. Two weeks ago, they did a billion dollar convert zero coupon to buy Bitcoin. This week, they're back in the market doing another billion dollar convert zero coupon to buy Bitcoin.

You can rinse and repeat that frequently.

Tell me what you think or told Microsoft that they should do and what are the chances that happen?

Microsoft is buying its own stock back. It's buying bonds. It's divvying out cash flows. If they simply swept their existing cash into Bitcoin, it probably adds a trillion of the market cap and $150 to the share price.

If they converted the dividend into Bitcoin, adds another $150 to the share price, another trillion to the market cap.

If they replaced the buybacks with Bitcoin instead of surrendering the capital, they invest the capital, adds another trillion dollars and $150 to the share price.

If they just take a little bit of leverage, they basically take 10 percent leverage on a huge stack of Bitcoin, they add another trillion.

So, what I'm saying is, instead of surrendering the capital and then leveraging up the company, right now Microsoft trades at 20 times forward expectations.

So, what you're, what you're, or I'll say it 95 percent of the enterprise value of Microsoft is based on expectations is the best way to say it, right?

And that means it has, it's very asset poor, it's expectation rich. Why don't you actually buy assets and instead of being 95 percent on expectations, be 50 percent on expectations.

De-risk the company, grow the enterprise value and feed the digital economy of the future.

What was the response?

The shareholder meeting is December 10th. We'll find out.

What do you expect?

Glazed eyes.

I don't have any illusions that mega corporations are going to immediately embrace Bitcoin. But what I do think is it's going to become part of the conversation.

And there are about 120 companies that are public that are starting to hold Bitcoin right now.

There are a lot of Bitcoin standard companies like Merra, like similar, like Meta Planet, like, you know, Rumble is getting into the business.

And as they start to buy Bitcoin and issue fixed income securities and equity securities, you're going to see demand increase.

So what ending away anything?

Sorry?

What ending? It feels like we're in like the second ending of all, or even, maybe not even.

Yeah, I think we get into the third inning when we cross $100,000.

That's the third inning.

Right now we're still early.

I think that there's a softball game.

It might be a twilight double header, even. It might be a herb, maybe 13 or 14.

Michael, thank you.

I'm going to go home and think some more.

I think on this after you come in.

And then my head starts hurting and then I give up.

Thank you, Joe.

You're welcome.

I'd like to talk.