MicroStrategy’s CEO Michael Saylor has recently described why the Nasdaq-listed business intelligence firm decided to invest in bitcoin over other assets such as gold, real estate, or commodities.
Speaking to Reuters Chief Correspondent Anna Irrera, during the Binance Blockchain Week, as first reported by Decrypt, Saylor revealed that MicroStrategy estimates aggressive monetary expansion will be of 10 to 15% per year, which creates a “debasement of the purchasing power of currencies against scarce assets.”
Saylor added that MicroStrategy traditionally had a large cash position in its treasury, which was invested in sovereign debt in an “environment where the money supply was expanding by around 5% a year.” The firm, he said, generated 2 to 3% interest a year against a 5% cost of capital.
In the current environment, he noted, sovereign debt yields less than 1% in the short term, while the cost of capital has surged to 15%. To prevent loss of shareholder value, he said, MicroStrategy started looking for alternative investments like stock, real estate, and more.
He added: “The returns on gold didn’t look nearly as compelling as Bitcoin. So we eventually found crypto because, in essence, in the crypto world you can create a digital gold—and Bitcoin is that digital gold.”
Per his words, if an investor is looking for a non-fiat store of value, “it’s logical that you would settle upon bitcoin as digital gold.” Saylor pointed out that derivatives were not a fit for the company as MicroStrategy isn’t a trading firm, and as it isn’t trading it isn’t concerned about short-term volatility.
Instead, he pointed out that the firm has a long-term time horizon and looking at BTC, the price of the cryptocurrency “is not volatile at all, it’s just going up” over the last 10 years. Investors, he said, should have at least a four-year time horizon, which makes volatility inconsequential. MicroStrategy is, instead, concerned about whether its investments will go up over time.
Bitcoin, Saylor said, is a solution to the current environment. While he revealed that before March he didn’t see the value in it, things have changed because MicroStrategy had the bandwidth to look into bitcoin as a solution to potential currency debasement and inflation.
The flagship cryptocurrency, he added, can act as a store of value for any corporation, public or private, as it’s a “logical solution” to the problem. The world, he said, “desperately” needs a non-fiat store of value. To Saylor, the need is “much bigger than gold.”
MicroStrategy, it’s worth noting, has been buying bitcoin as part of its corporate strategy. The company has already invested $1.145 billion to buy 71,079 BTC, which are now worth over $2.6 billion.
