There's a lot of things we find very interesting about Bitcoin and the developing ecosystem, but nothing has quite captured our attention recently as the following announcement from MSTR: MicroStrategy public company and Nasdaq listed stock that recently announced in their 10Q filing that they are holding Bitcoin as part of their treasury program.
When we first heard the announcement last week, we thought it would be something like a toehold position, meaning a few Bitcoin here and there. But after looking deeply into their 10Q filing, it turns out they didn't just buy a few Bitcoin, they bought a lot. As in 21,454 a lot, which equals $250mm in Bitcoin or almost 100% of their remaining cash balance on hand and an amount equivalent to 20% of their market cap of $1.25bn at the time of writing!!!!!
We believe that public and private companies adopting Bitcoin as a reserve currency is a precursor to small nations following suit which is something we noted in our Get Off Zero: The Case for Bitcoin report (password: getoffzero) discussing Bitcoin adoption and the final Gartner Hype cycle where we believe nations states will add Bitcoin to their foreign reserves(estimated in 2-3 years from now) as the market size and liquidity makes this feasible.
MicroStrategy deciding to wave Bitcoin in on their balance sheet is so impressive in terms of the magnitude of the purchase and the clarity behind the decision, that there's no question other companies will follow. The fact that MicroStrategy was able to do this in size and under the radar offered them a huge first-mover advantage to accumulate in size that other companies won't be as fortunate to replicate.
Full Press Release and Article:
Probably the most important part of the entire announcement is how Matt Saylor, the CEO of MicroStrategy, articulated his belief and thought process. Some key excerpts:
“Our investment in Bitcoin is part of our new capital allocation strategy, which seeks to maximize long-term value for our shareholders. This investment reflects our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash. Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions. MicroStrategy has recognized Bitcoin as a legitimate investment asset that can be superior to cash and accordingly has made Bitcoin the principal holding in its treasury reserve strategy.
"MicroStrategy spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations.”
Amazing right? This person is not a Bitcoiner, doesn’t make Bitcoin products or blockchain-based products and is not trying to hoodwink unsuspected investors by adding blockchain or crypto to its name. MicroStrategy, as a company is simply looking out for shareholder value in these unprecedented times. Saylor perfectly articulates the case for a decentralized, digital currency. He goes on to say:
“We find the global acceptance, brand recognition, ecosystem vitality, network dominance, architectural resilience, technical utility, and community ethos of Bitcoin to be persuasive evidence of its superiority as an asset class for those seeking a long-term store of value. Bitcoin is digital gold – harder, stronger, faster, and smarter than any money that has preceded it. We expect its value to accrete with advances in technology, expanding adoption, and the network effect that has fueled the rise of so many category killers in the modern era.”
And So it begins….
It’s not hard to read the above and realize that a certain form of magic internet money that was initially bought on the fringes by geeks, cypherpunks, anarchists, and innovators continues to move closer and closer towards mainstream adoption and acceptance. As Governments in debt themselves and Central Banks continue to destroy the value of money by printing unlimited quantities, the reasoning behind why individuals, corporations, and central banks will look to add Bitcoin as the reserve asset on their personal, corporate and nation-state balance sheet becomes pretty clear: Bitcoin is sound money built for a digital world.
Until now, Bitcoin’s remarkable rise has largely been an organic grassroots effort by retail investors. With Hedge Funds sniffing (Paul Tudor Jones) as noted in the Bitcoin Tipping Point from back in April, large public corporations jumping into the pool and nation-states entering in only a matter of time, we should see an incredible acceleration of adoption in Bitcoin’s US dollar value given its scarcity and limited supply.
For those on the sidelines, this should be as much of a seminal event to nudge you off the sideline. If there was any doubt about where we are going, whether the price is too high (HINT: it’s low) and/or if you missed the move, I say this with forceful conviction:
GET OFF ZERO
If you want an analogy of where we are, I’d argue the last 11 years have been a long drawn out Spring Training and we’re just now wrapping up batting practice before the 1st inning of Opening Day. Bitcoin is a $200bn market cap. The entire Digital Asset market cap is $340bn. For context, AAPL has gained $1 trillion in market value alone since March.
Bitcoin is competing for addressable markets such as Global Store-of-Value and Global Money. It’s literally a tiny little dot that is likely mispriced due to its complexity and lack of understanding. In the words of Paul Tudor Jones,
“At the end of the day, the best profit-maximizing strategy is to own the fastest horse. Just own the best performer and not get wed to an intellectual side that might leave you weeping in the performance dust because you thought you were smarter than the market. If I am forced to forecast, my bet is it will be Bitcoin.”
“So that was the flavor behind some of the discussions that were had when scoring the suitability of each asset as a store of value. What was surprising to me was not that Bitcoin came in last, but that it scored as high as it did. Bitcoin had an overall score nearly 60% of that of financial assets but has a market cap that is 1/1200th of that. It scores 66% of gold as a store of value, but has a market cap that is 1/60th of gold’s outstanding value. Something appears wrong here and my guess is it's the price of Bitcoin.”
DAiM Updates, Earning Yield, Getting Invested
A lot has been going on over the last month and a half that is tremendously great for DAiM. We’ve onboarded a record amount of assets and new clients, we forging new services and relationships, we’ve offered interest income/yield on Bitcoin and we’re close to rolling out Employer-sponsored 401k plans with Bitcoin. We’re about to start raising funds for ‘NEW MONEY’ the brokerage and Wealth Management platform I’ve been working on to compliment the Investment Advisory services we offer through DAiM. Furthermore, we’re learning that other businesses in our industry are signing exclusive deals with other institutions that prevent them from working with DAiM because we are the best way to onboard at the lowest costs in the industry. We see this as the ultimate compliment that they see us as the gold standard and a threat to their predatory and high fee business lines. We couldn’t be more flattered.
A big thanks to our existing clients for their trust and support in helping us build the first licensed Registered Investment Advisor business for Bitcoin and Digital Assets. Their continued relationship with us and the recent deluge of referrals are most appreciated by us. It is truly the highest compliment we can receive as your Investment Advisor.
There may be a few reasons for our recent success and explosion in AUM. There’s been increased interest in the asset class given Federal Reserve money printing and dollar softness as investors look for alternative ways to store value. Our model portfolio adjustment in June to 80% Bitcoin, 20% Ethereum has allowed investors to pick up close to an additional 9% in returns as Ethereum has impressively outperformed Bitcoin since that adjustment. However, the biggest game-changer has been our new ability to offer positive cash flow against our investors’ Bitcoin and Digital Asset portfolio. What do we mean when making this statement? In its simplicity, our investors are able to buy and custodial Bitcoin, Ethereum, and other Digital Assets with us and we subsequently lend it out in a very safe and compliant manner while earning interest income paid in Bitcoin or USD for our investors. Earning an additional 5-6% yield while sitting in Bitcoin, not only makes Bitcoin a positive carry asset that more than covers our management and custody fees, but offers close to 8-10% in tax-equivalent yields inside your IRA/Retirement accounts. If you are interested in investing in Bitcoin and digital assets while earning positive cash flow (and potentially tax-deferred or tax-free returns) while waiting for the massive call option on Bitcoin becoming a recognized form of global money to play out, you can contact us below to schedule a consultation to evaluate your options:
Or if you a ready to go and want to get moving quickly you can start an account by filling out our new client profile: