$400 million all in Bitcoin! MicroStrategy CEO reveals secrets on Podcast: I want assets that outperform gold by a thousand times

Nasdaq-listed company MicroStrategy shocked the world on August 11 when it announced that it would allocate the remaining $250 million on its balance sheet to Bitcoin. The statement on September 11 about further increasing its Bitcoin holdings sent the crypto community into a frenzy. Morgan Creek co-founder Anthony Pompliano also invited MicroStrategy CEO Michael Saylor to participate in his Podcast program. Apart from discussing macro views on Bitcoin, the conversation largely revolved around one theme: "Cash is trash." Key takeaways are as follows:

Major Changes in Macroeconomics

MicroStrategy CEO Michael Saylor pointed out that the company's balance sheet holds a lot of cash, with good operations and debt situation, but has been severely impacted by the COVID-19 pandemic.

Subsequently, as the situation improved, demand for software and services remained strong, while operational costs for meetings, marketing, and travel decreased, leading to increased company revenue. However, significant changes in economic conditions have occurred, especially regarding the monetary policy stance of the Federal Reserve. Saylor stated:

I will never buy a 30-year bond with a 2% yield, but this year not only did stocks surge, but bonds also soared. The only thing that didn't perform well was cash. What's wrong with this picture?

Governments Quietly Confiscating People's Wealth

MicroStrategy is a company with a market value of $500 million, earning $50 million annually. Saylor pointed out that back in 2009, during low interest rates, MicroStrategy could easily earn a risk-free profit of 4 - 5% with excess cash. However, the situation is completely different now. Saylor said:

Now banks are telling you every year that interest rates are going down, it's like someone taking 2% of the money you have in the bank every month, evaporating 25% over the year. Holding a large amount of cash is foolish in such high inflation rates. Therefore, our company needs to invest the excess cash in something.

What to Invest In?

Saylor described MicroStrategy as sitting on a $500 million ice cube that is melting at a rate of 15-20% annually. He asked Pompliano (Pomp) how he would use $500 million and what would be on his investment list. Pomp stated:

I would buy a lot of Bitcoin, along with other hard assets that hedge against inflation like real estate, gold, silver, etc.

Saylor pointed out that buying stocks such as Amazon, Apple, Facebook, Twitter, etc., in 2012 would have seen gains of 10 times, but in the future, they may only double or triple. Therefore, he hopes to find an asset that provides asymmetric risk-return, and he believes that Bitcoin is a thousand times better than gold or silver.

Preparations Before Entry

This year, Saylor started learning about Bitcoin from scratch. He read "The Bitcoin Standard" and watched videos by authors like Andreas Antonopoulos, and other influential figures such as Pomp, Parker Lewis, and Max Keizer.

At the same time, in order to gain approval from everyone, he mandated that all the company's stakeholders listen to Bitcoin podcasts, read papers, watch debates on fiat currency by Erik Voorhees and Peter Schiff, debates on hedge assets by Max Keizer and Peter Schiff, and engage in negotiations and discussions before actually investing in Bitcoin.

How to Buy Four Billion Bitcoin? Through an Exchange?

As reported earlier, MicroStrategy bought Bitcoin in batches totaling $250 million and $175 million, with a total investment of $425 million, approximately 85% of the company's cash reserves. Such a large order was not executed through an exchange but through top-tier over-the-counter (OTC) service providers. Saylor said:

We had to negotiate with international exchanges, custodians, solve all technical and security risks, and choose a team to work with. Buying several hundred million dollars' worth of Bitcoin requires thousands of small transactions daily, it cannot be done in one go, and requires a lot of patience. We don't chase the market; we let the market come to us.

Bitcoin Known for High Volatility

Pomp asked Saylor if he was not scared by the high price volatility of Bitcoin. Saylor gave his three observations:

• Institutional funds like Grayscale are pouring in.
• The 24/7 trading environment is more successful than traditional markets.
• Volatility must be endured.

Saylor stated that the influx of institutional funds will alleviate Bitcoin volatility. For example, whenever the price is low, it's a buying opportunity for him, and that's how he efficiently bought $425 million worth of Bitcoin. He believes that holding cash yields negative returns, so one must endure this volatility, similar to the concept of "investing involves risks, but not investing carries even greater risks."

How is it Perceived by the Industry?

Pomp asked if publicly buying Bitcoin has influenced other CEOs. Saylor pointed out that all companies are quite busy due to the COVID-19 pandemic and don't have time to worry about what others are doing. However, he jokingly mentioned that he hopes Pomp can persuade Twitter CEO Jack Dorsey to follow suit and invest Square and Twitter's cash reserves in Bitcoin.

In conclusion, Pomp stated that Bitcoin's market value is only $200 billion, which is 40 times less than the $8 trillion market value of gold. Bitcoin outperforms gold in many aspects, and he believes that MicroStrategy has made the most correct decision.