In just two years, MicroStrategy CEO Michael Saylor has become one of the most polarizing figures in corporate America after turning his midsize software company into what he described as the “de facto proxy for bitcoin” as he used huge amounts of influence. to buy approximately $4 billion in bitcoin at an average price of more than $30,000 per coin.
While MicroStrategy MSTR,
shares have fallen significantly from their peak north of $1,000 in February 2021 (which coincided with bitcoin’s peak above $65,000 per coin) Saylor said MicroStrategy’s experiment with bitcoin has been a success.
He explained the thought process behind the decision.
As the covid-19 pandemic spread around the world, MicroStrategy quickly found that its employees were being picked off by technology rivals such as Meta Platforms Inc. META,
and Microsoft MSFT,
when the technology industry went on a hiring spree.
“We were sitting on a moment of truth in the second quarter of 2020,” Saylor said Wednesday at MarketWatch’s first Best New Ideas in Money festival.
While MicroStrategy’s enterprise software business was generating steady amounts of cash, the company had essentially become “dead money.”
When the Federal Reserve cut interest rates back to zero, Saylor said he faced a choice: either sell out to a competitor, take the money it generated and give it to employees to try to keep them from defecting — or try something new .
“Either we had a quick death, a slow death, or we could take a risk,” he added.
The risk was buying huge amounts of bitcoin – about $4 billion over the next year, at an average price of just over $30,000 per coin.
While MicroStrategy’s value rose as the crypto wave drove the price of bitcoin higher, the subsequent drop has investors worried that the company may struggle to repay the billions of dollars it borrowed to finance its crypto purchases. But Saylor insisted his shareholders have made “billions” as the stock is still trading well above its April 2020 level.
Looking ahead, Saylor does not expect the company to struggle to repay its debt burden despite the drop in bitcoin’s price, as MicroStrategy was able to borrow at “extremely cheap” interest rates.
Saylor also said that bitcoin will not only come back, but will rise to new heights. He said he expects it to return to $65,000 “sometime in the next four years.” Beyond that, it could rise to $500,000 per coin “this decade” if it replaces gold and becomes more widespread in emerging economies, he said.
When asked by MarketWatch Editor-in-Chief Mark DeCambre if he still views bitcoin as an inflation hedge, Saylor insisted that notion still holds true, even though the price of bitcoin has fallen sharply in the face of the global inflation wave that has boosted markets since the start of 2022.
Asked if he would be willing to call a “bottom” in bitcoin, Saylor said, though he said the simple moving average of the past four years “makes the most sense,” adding that “we’re about at that number ” now .
He closed the conference with a bit of news: Saylor said MicroStrategy is developing new products using the lightning network, a cryptocurrency protocol meant to facilitate faster bitcoin transactions.
“MicroStrategy does lightning development. We develop lightning wallets that can be used in enterprise environments,” he said.
The price of bitcoin BTCUSD,
traded below $19,000 on Wednesday, just above its lowest level so far this year, according to CoinDesk.
Gain insight into investing and managing your finances. Speakers include investors Josh Brown and Vivek Ramaswamy; plus, topics such as ESG investing, electric cars, aerospace and fintech. The Best New Ideas in Money Festival continues on Thursday. Register to participate in person or virtually.
