In the span of just two years, MicroStrategy CEO Michael Saylor has become one of the most polarizing figures in corporate America after transforming his middling software company into what he described as the “de facto proxy for bitcoin,” as he used massive amounts of leverage to purchase roughly $4 billion in bitcoin at an average price of more than $30,000 per coin.
While MicroStrategy
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shares have fallen substantially from their peak north of $1,000 in February 2021 (which coincided with bitcoin’s apex above $65,000 per coin) Saylor said that MicroStrategy’s experiment with bitcoin has been a success.
He explained the thought process behind his decision.
As the COVID-19 pandemic spread around the world, MicroStrategy swiftly found its employees were being picked off by mega-cap tech rivals like Meta Platforms Inc.
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and Microsoft
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as the tech industry went on a hiring binge.
“We were sitting on a moment of truth in the second quarter of 2020,” Saylor said on Wednesday at MarketWatch’s inaugural Best New Ideas in Money festival.
While MicroStrategy’s enterprise software business was generating steady amounts of cash, the company had essentially become “dead money.”
As the Federal Reserve slashed interest rates back to zero, Saylor said he faced a choice: either sell out to a competitor, take the money it was generating and dole it out to employees to try to keep them from defecting — or try something new.
“We either had a fast death, a slow death, or we could take a risk,” he added.
The risk was purchasing massive amounts of bitcoin — roughly $4 billion over the following year, at an average price of just over $30,000 per coin.
While MicroStrategy’s value ballooned as the crypto wave carried the price of bitcoin higher, the subsequent drop has left investors worried that the company might struggle to pay back the billions of dollars it borrowed to finance its crypto purchases. But Saylor insisted that his shareholders have made “billions,” as the stock is still trading well above its level from April 2020.
Looking ahead, Saylor doesn’t anticipate that the company will struggle to pay back its debt burden despite the drop in bitcoin’s price, since MicroStrategy managed to borrow at “extremely cheap” interest rates.
Saylor also said that bitcoin will not only rebound, but will rise to new highs. He said he expects it to return to $65,000 “some time in the next four years.” Beyond that, it could rise to $500,000 per coin “this decade” if it supplants gold and becomes more widely used in emerging economies, he said.
Asked by MarketWatch editor in chief Mark DeCambre if he still sees bitcoin as an inflation hedge, Saylor insisted that the notion still holds true, even as the price of bitcoin has fallen precipitously in the face of the global inflation wave that has upended markets since the start of 2022.
When asked if he would be willing to call a “bottom” in bitcoin, Saylor demurred, although he said the simple moving average over the past four years “makes the most sense,” adding that “we’re about at that number” now.
He concluded the conference with a little bit of news: Saylor said MicroStrategy is developing new products using the lightning network, a cryptocurrency protocol that is meant to facilitate faster bitcoin transactions.
“MicroStrategy is doing lightning development. We’re developing lightning wallets that could be used in an enterprise setting,” he said.
The price of bitcoin
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was trading below $19,000 on Wednesday, just above its lowest level so far this year, according to CoinDesk.
Get insights on investing and managing your finances. Speakers include investors Josh Brown and Vivek Ramaswamy; plus, topics such as ESG investing, EVs, space and fintech. The Best New Ideas in Money Festival continues Thursday. Register to attend in person or virtually.
