MicroStrategy founder Michael Saylor said the company's ultimate goal is to become the leading Bitcoin bank - ultimately growing into a company worth trillions of dollars.
(MicroStrategy rebrands as a "Bitcoin development company", buy MicroStrategy stock instead of BTC)
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ToggleMicroStrategy is creating Bitcoin capital market tools
Since 2020, MicroStrategy has been actively purchasing BTC, using debt and equity to maximize returns and outperform many traditional investments. The company issued new debt in September and bought 7,420 BTC, bringing its total BTC holdings to 252,220 BTC, equivalent to 1.2% of the total BTC supply, making it the world's largest publicly traded BTC holder.
According to The Block, Bernstein's digital asset head Gautam Chhugani recently reported that MicroStrategy founder Saylor has likened the company to a Bitcoin bank or Bitcoin finance company, with its core business being the creation of Bitcoin capital market instruments covering stocks, convertible bonds, fixed income, and preferred shares.
The company's strategy is based on a long-term belief in BTC as the optimal hard money. Chhugani explained that BTC currently only accounts for 0.1% of global financial capital, and Michael Saylor predicts this ratio will rise to 7%, meaning that by 2045, the price of each BTC will reach $13 million.
Bernstein analysts stated that if the US capital markets allow MicroStrategy to raise funds through debt, equity, and other instruments, it would be happy to expand and arbitrage between the US dollar capital market and BTC, with Saylor's base case scenario projecting a 29% annual growth for BTC.
When asked about the scalability of the company's debt strategy, Saylor said:
I think it's infinitely scalable, we could raise $100 billion, we could raise $200 billion, that's no problem. This will be a $1 trillion asset class, then $10 trillion, $100 trillion. The risk is simple - it's Bitcoin. You either believe in Bitcoin or you think it's nothing.
The Bitcoin bank that borrows money to buy BTC
Chhugani also pointed out Saylor's view that the potential average annual growth rate of BTC is attractive enough to continue arbitraging the capital markets for profit. Because traditional banks lend to individuals, businesses, and governments, but he believes this is riskier than "lending to Bitcoin" (referring to investing in BTC).
We think a better idea is to borrow $10 billion from those who want to lend, and give them an extra 1% return, and then lend it to Bitcoin at 30% to 50% interest, and there's no counterparty risk.
Once you overcome the volatility and learn how to manage it, I expect the most pessimistic scenario is that Bitcoin will grow only 22% per year over the next decade. Who wouldn't pay you a 22% annual interest rate?
MicroStrategy's recent gains far exceed BTC
MicroStrategy started buying BTC in September 2020, and using that as the base period, the chart below compares the MicroStrategy stock price (blue line) and the BTC price (red line), showing a high correlation between the two, but with MicroStrategy's stock price significantly outperforming BTC recently. Since its BTC purchases, the stock price has risen 1,395%, while BTC has gained 510% during the same period.
MicroStrategy has surged 207% so far this year, outperforming even the AI powerhouse NVIDIA's 173% gain.
