The last purchase of BTC Michael Saylor made was at more than $49k per bitcoin, a price at which I said further losses in BTC price were near guaranteed. Still, his average price of purchasing BTC, while three times higher than the average of $10,000 per coin achieved by my patreons (before selling at $66k this past November), is not terrible. Furthermore, his company Microstrategy massively increased their long-term debt by more than $1.667B in just 9-months’ time in 2021, much of which was used to acquire more bitcoin. In my opinion, taking on billions of additional debt to buy a notoriously volatile asset and to stake the entire future of a company on higher BTC prices is quite foolhardy, especially when his company declared operating losses of $106M and earnings losses of ($3.61) in its most recent quarter.
Despite Saylor’s statement that “being a leveraged, bitcoin-long company is a good thing for our shareholders,” that simply has not been the case as MSTR’s share price has plunged and consequently shrunk MSTR’s market cap since last 9 November 2021 by more than $5.62B dollars, or $5,627,000,000, a loss in market cap that is greater than its present market cap. Even though Saylor has bragged in the past about borrowing billions to buy bitcoin at just 1.5% annual interest, he deviated enormously from this strategy by offering half a billion dollars worth of corporate junk bonds at a much higher 6.125% annual interest rate to feed his bitcoin acquisition obsession.
Although the first of Microstrategy’s long-term convertible notes in the amount of $637M does not mature until December 2025, with another $1.028B maturing in December 2027 and another $488M maturing the following year, if BTC prices ever dip to $20k, $10k or even lower in future years, then even this maturity schedule will not save Microstrategy from an inability to repay its long-term debt. Furthermore, it’s irrelevant that BTC prices have rebounded in the past couple of days from about $33k to $38,361 as I type this sentence on 26 January 2022. This price rebound that is causing numerous online BTC analyst frauds to pat themselves on the back because they urged their BTC followers to remain calm at sub $36,000 prices and to “be bold when everyone else is afraid” will likely disappear when US financial regulatory agencies announce further strict regulations in coming weeks. Sometimes, there is valid reason to be afraid “when everyone else is afraid” and simple adoption of an investment cliché as advice is the advice of a simpleton that doesn’t understand what drives BTC prices.
Finally, while everyone is fixated on news of further BTC regulations, crypto traders should instead be fixated on trying to determine the date when the Feds will unexpectedly spring news of a hard fork of BTC to announce the birth of their own Fed Coin. Everything else is white noise.
Well written as always, thanks.
Hard fork of BTC FED coin unlikely though? I think they will be looking for something more up to date, faster, cheaper & non proof of work for any such coin? We shall see, they are so stupid I would not put it past them