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MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset
- cs702 6y ago"[We] 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." Wow.
- caiobegotti 6y agoIt seems to be a common sentiment but the general business people can't completely back it with macro data so everyone just brace for impact... I assume these folks have actual intel to take this big decision.
- macspoofing 6y ago>I assume these folks have actual intel to take this big decision. They sure write like they do. But they act like gamblers hoping for the next big score.
- diegocerdan 6y agoWhat if sentiment is blue-pilled and holding dollars is actually the gamble? You would be holding the wrong side of the stick. I would agree that dollars have little downside but the purchasing power degradation of dollars feels like a irremediable tax on savings. And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.
- take_a_breath 6y ago==And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.== Two of these things are not like the others.
- macspoofing 6y ago>What if sentiment is blue-pilled and holding dollars is actually the gamble? Even if you have no confidence in the dollar, doesn't mean Bitcoin or crypto currencies are a good alternative. >And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge. That is a strong statement. There is no evidence that crypto currencies are a 'decent hedge' for anything.
- kneel 6y ago>They sure write like they do. But they act like gamblers hoping for the next big score. Sounds like wall street
- wokwokwok 6y ago> I assume these folks have actual intel to take this big decision. Unfortunately, my experience working with MSTR has been that the expectation of competence isn't really born out in actual competence at a technical level. I suppose you can only hope that at a management level it's a different story. They certainly seem to sell their product very well.
- Havoc 6y ago>I assume these folks have actual intel to take this big decision. Short of a crystal ball I don’t see how
- throw1234651234 6y ago>I assume these folks have actual intel to take this big decision I assume it's "Our advisors can push mutual funds, they will be able to push trusts with the same fee structures and incentives to sell that hold an asset that has 10Xed before." That alone seems like enough. Let's say you don't believe BitCoin. If you have worked in finance, or had a financial advisor come to your company, you probably believe in their ability to sell. People still think financial "advisors" (Series 7/63, CFP) know something / have interests besides pushing mutual funds.
- ausbah 6y agowasn't quanatative easing done for like a decade after tbe recession with no inflation? why is there any reason to think this time around will be different? scale?
- ta17711771 6y agoScale indeed.
- rapsey 6y agoBecause now money is given directly to people due to covid. Before money just went to wall street.
- diegocerdan 6y agoNo inflation? Look what new money has bought and you will clearly see huge inflation: stocks and housing. We don't see shopping cart inflation because it's countered by the technological cheapening of the production. And the key fact that new money is not being given to people buying groceries.
- mac01021 6y agoI never understood how anyone can find it remotely fair for the Fed to introduce new money into the economy by any means other than equal division between all citizens.
- SpicyLemonZest 6y agoThe Fed introduces new money into the economy through two major mechanisms: setting a target interest rate on overnight loans, and buying assets at market rates. It's not clear how either of those would be extended to an equal division between all citizens, the vast majority of whom don't want overnight loans and don't have financial assets they want to sell.
- baconandeggs 6y agoHence why they shouldn't do it.
- bhaak 6y agoI can totally believe how Bitcoin, Ethereum and the rest of the cryptocurrency space could go through another bubble (the last one was quite small if you compare it to the DotCom bubble and consider how much money is floating around nowadays). So I can imagine that this will turn into a big profit for them but the arguments are hilariously weak. Granted they will get a lot of PR out of it.
- lifty 6y agoHilariously weak? I think they lay out a reasonable argument considering the amount of debt around the world and the fragility of the economy. The big question is: will we have deflation or inflation? I am not sure, but I doubt the USG will let itself go bankrupt.
- DSingularity 6y agoCorrection: the world won’t let the USG go bankrupt. American generals won’t just stand down, disband their forces, and turn in their boots. If the USG goes bankrupt a massive war will breakout. In the business world things have been going pretty well so if more taxes become necessary to prop up the USG they will happily oblige.
- lifty 6y agoI agree with what you are saying, but even before that point, the USG which is sovereign over its money supply, will be able cover any liabilities it has by creating the necessary money. This is what I was alluding to when I mentioned that the USG won’t let itself go bankrupt. They will destroy the USD before going bankrupt, because the repercussions of going bankrupt are much worse than a lower valued USD. Also, the whole debt ceiling is a charade; the FED can and has monetized treasury debt without any fuss.
- martinko 6y agoInflating the debt away would actually be the opposite of bankruptcy.
- 6y ago
- thinkmassive 6y agoOriginal press release submitted here: https://news.ycombinator.com/item?id=24120060 https://news.ycombinator.com/item?id=24120060
- irjustin 6y agoThis company apparently was/is quite cash rich. It bought back $250m of its own shares and then bought 250m of BTC... wow. Does anyone have the wallet address? or pinpoint it?
- LittlePeter 6y agoThere is high chance that the 21K+ bitcoins are spread out over multiple wallets. Most likely hardware wallets, spread out over multiple geographical locations. I also don't see what the benefit would be for MicroStrategy to publish a csv files with all their wallet addresses.
- seibelj 6y agoEven more likely a custodian like Coinbase or Gemini already has the funds in cold storage, and a sale occurred OTC which simply modified who owned how much of the BTC.
- LittlePeter 6y agoTrue, this is even more likely than the scenario I spelled out.
- throw1234651234 6y agoHere is a list of 20 companies buying Bitcoin recently: https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/valuable-sec-data-on-20-institutional-bitcoin-investors-could-soon-disappear/#6a77d3fe1de2 https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/v... Keep in mind that 250 mil, and 250 mil times 20 is a drop in the $214.4 billion bitcoin market cap and doesn't move anything. Just a sign of mild interest. Furthermore, Grayscale just ran a crypto ad campaign on large TV networks such as Fox.
- LittlePeter 6y agoIt depends over what time period those 21K bitcoins were bought. If they would have been bought within a day, there would absolutely be market impact (bitcoin price would increase by double digit percentages). The daily trade volume is mostly people passing bitcoin to each other. If a whale like MicroStrategy is actually taking them out of an exchange, things will dry up quickly. My guess the bitcoins were bought over a period of at least couple weeks, and probably using OTC trades as well.
- throw1234651234 6y agoAs far as I understand, the companies in the list (didn't check if OP's company is included) are buying from Grayscale. Grayscale has been buying up BTC and ETH for years, but ramped it up recently (I want to say Q1/Q2, but don't quote me on that). So these orders are not hitting "the public market", it's coming from Grayscale inventory (not even that, since the companies aren't buying directly and taking custody). Also, good point on BTC supply being less than the 21 mil cap / whatever was mined already.
- barbegal 6y agoNot all of that market cap is liquid. I think it is safe to assume that a least 4 million bitcoins [1] or $50 billion of value is completely lost and over time that will grow as more and more coins are lost. [1] https://coinsutra.com/how-many-bitcoins/ https://coinsutra.com/how-many-bitcoins/
- simonebrunozzi 6y ago
- iammru 6y agoIt could also signal that they're unable to deploy capital to innovate (and bring future cash flow).... MicroStrategy has been an acquisition target for many years.
- rafaelturk 6y agoThis is also my take, bad capital allocation.
- diegocerdan 6y agoIf most assets are still rising and breaking all time highs in a downturn economy what it really means is that the dollar is falling in a race to the bottom with all other fiat currencies. People avoid holding money by buying stocks and housing, not because of natural P/E ratio but forced by the continuously devaluation of cash. What "money" do you expect businesses want to hold in this situation?
- rjknight 6y agoBusinesses almost certainly won't be holding cash in quantities any larger than necessary to meet their short-term obligations. The entire purpose of QE and similar schemes is to reduce the value of the fiat currency relative to other things, in order to encourage people to swap their dollars for things (increasing consumption) or financial assets (increasing investment, at least indirectly). The problem is that the investment doesn't seem to be happening, partly because of expectations of a future crash. By this point I suspect this has more to do with real-world factors (climate change is a serious obstacle to long-term economic growth) than government policy.
- afpx 6y agoThe interesting thing is that stocks and real estate were traditionally considered difficult things to protect. For example, without the US military, many global businesses wouldn't exist. It's basically like the US citizens paying taxes so that stocks are safe investments for the richest of the world.
- deleted 6y ago[deleted]
- Ologn 6y agoAny commodity could be held. If we look back half a century in the US, the commodity held was gold. Or rather, federal reserve notes redeemable for gold. Gold makes a good currency as it has the properties of a commodity that makes a good currency. It is durable, divisible, uniform, and portable. Federal reserve notes a half century ago were even more portable. You could mark the bills or write down serial numbers and make the bills difficult to use if stolen. If torn, the Federal Reserve would issue you new bills. Money or currency historically has been a commodity that had the above mentioned properties (durable, divisible, uniform, portable), so that it is convenient for trade. Really any commodity could be held to store value, although some store value worse than others (perishable food is not exactly durable). When you get into very large sums which you may want to transfer around the world in a split second, you run into more of a problem of course.
- speedgoose 6y agoThey do not care about the environment. Bitcoin contributes a lot to global warming by design.
- AnIdiotOnTheNet 6y agoMaybe, but who really cares about the environment when they stand to make some easy money?
- speedgoose 6y agoWe need to have sanctions for company and individuals that run the companies.
- seibelj 6y agoHydro power, solar power, wind power, these do not contribute to global warming. Plus, Bitcoin is a valuable asset (for many people) and the reason it keeps its value is that it's safe. Energy is expended to keep it safe. That is a free market choice, and you can disagree with it, but many choose to pay for energy to protect Bitcoin.
- speedgoose 6y agoI do not believe bitcoin only run on clean energy. Even if it was the case, this energy could have a better usage like solving actual problems instead of bruteforcing checksums. The free market needs to be controlled when it destroys the environment. The people needs to be responsible for their actions.
- baconandeggs 6y agoYour replies also contribute a lot to global warming.
- speedgoose 6y agoTelling people that bitcoin and its stupid proof of work consume energy indeed consume energy. But informing people about it is worth it. And the energy use is nothing compared to bitcoin. Not even a rounding error. Or do you mean I make people hot (upset)?
- hyko 6y agoIt’s so crazy that it might just be completely crazy. Behaviour that is grounds for an investigation by shareholders. In a world where the governments can’t support their own currencies, nobody will give a shit about Bitcoin. “I don’t trust the real hospitals because of medical negligence, better get my amputation done by that guy operating out of his garage just to be safe.”
- solotronics 6y agoBTC is fully accountable while it's issuance is not in the hands of any certain group. Therefore it has a permanently predictable rate of inflation that is much lower than fiat currencies at the moment. Nobody has to trust anyone, that's the whole point of bitcoin.
- hyko 6y agoExcept you have to trust lots of people for Bitcoin to work, from DNS record holders to developers to intermediaries and beyond. The whole system is dripping with trust, so why not just use standard currencies?
- martinko 6y agoFalse, you do not have to trust anyone. You decide what code you run, not developers. As far as DNS goes, you should study the bitcoin consensus protocol in more detail.
- hyko 6y agohttps://bitcoin.stackexchange.com/questions/2027/how-does-the-bitcoin-client-make-the-initial-connection-to-the-bitcoin-network/2030#2030 https://bitcoin.stackexchange.com/questions/2027/how-does-th... Do you trust whoever happens to own xf2.org more than you trust a central bank? Do you trust the domain name registrar more than you trust a central bank? Why? You decide what code you run, not developers well, sure you can run whatever code you like on your machine...the Bitcoin devs get to decide whether your software counts as a Bitcoin client or not. They are in a position of power and you must trust them.
- haolez 6y agoAt this point in time, I believe that "investing" in Bitcoin is, in fact, a short in the dollar (for Americans).
- sonicggg 6y agoI feel conflicted by this expectation from people that bitcoin will continually grow ad eternum, just because the supply is limited. I'm a believer on cryptocurrencies, but bitcoin being a first generation project, still has several pitfalls, such as transaction throughput, slowly trying to be addressed by other projects. What happens when people start flocking to ethereum, cardano, eos, or something else? Will it retain demand? Maybe it will, considering that gold is almost as worthless, and it's still used as a major hedge against financial turbulence. But it's something to keep in mind.
- briandw 6y agoIt’s not the Bitcoin will continue to rise, it’s that the dollar will continue to fall. All currencies eventually become worthless.
- deleted 6y ago[deleted]
- lawlessone 6y ago"What happens when people start flocking to ethereum," might be an issue with it's completely unverified supply. Eth might work as currency of sorts but not as an asset to hold.
- nwsm 6y agoTheir stock has risen 12.4% today so far (NASDAQ: MSTR)
- seibelj 6y agoI bookmarked this HN thread back when the crypto bubble popped: https://news.ycombinator.com/item?id=18640755 https://news.ycombinator.com/item?id=18640755 Interesting to re-read this (and other) threads now that BTC is one of the best performing asset classes in 2020...
- deleted 6y ago[deleted]
- paulpauper 6y agoI see shareholder lawsuits on the horizon if this does not work out.
- kevin_thibedeau 6y agoIt worked out for Shkrelli's investors. He still went to jail.
- seibelj 6y agoDecentralized Finance (DeFi) is the green shoots of a new and innovative financial system. It will break, it will be hacked, but longterm I believe this is the direction of finance - borderless, global, instant, peer to peer. Artificial barriers / borders / regulations simply don't matter when the mechanism for such transfers and investment are unstoppable and permission-less. Look at Compound Finance - $2 billion+ in assets deposited and over $1 billion borrowed https://compound.finance/markets https://compound.finance/markets This can't be stopped - and there is no government regulating it!
- jcfrei 6y agoI am also optimistic about the long-term value created by DeFi and the new business models it will allow. But for now I think the sole reason it exists is because people use it to get leverage for speculation.
- seibelj 6y agoA lot of modern finance fulfills that need. Give it time, and it will also be used for productive capital formation in a bigger way.
- robjan 6y agoThe problem with Compound is that lenders and borrowers are rewarded with a utility token which is more valuable than the interest on the loans. This creates the opportunity where you can lend money and borrow money collateralised against that loan over and over again.
- aphextron 6y agoHow is Bitcoin not just a proxy for USD?
- safog 6y agoDid you read their argument at all? The macro bet is that all the money printing is devaluing fiat currencies. Store of value assets like Gold and BTC are rallying because of this. The USD I think buys 15% less EUR than it did pre-COVID. Similar results even if you compare it to a basket of world currencies.
- martinko 6y agoHow do you figure? Is gold a proxy for USD?
- Valentino3 6y agoUSD is the only currency with which a person can pay its US taxes. Can't do that with Bitcoin. One US dollar can not fluctuate in value relative to itself. The "exchange rate" between USD and BitCoin fluctuates continuously. USD is legal tender. You can buy a cup of coffee anywhere with USD. Not so with BitCoin. USD does not have a bid/offer spread for transactions. BitCoin trades as two sided market. USD can be deposited at bank, be protected by FDIC deposit insurance, and can earn an agreed rate of interest. Not so with BitCoin. ...stopping, though this could become a long list BitCoin is an asset that can be bought or sold in exchange for USD. So is gold (as already noted), oil, company stock, lawn chairs, tracts of land, etc. A dollar-denominated asset is not the same as its market value in dollars.
- CryptoPunk 6y agoAFAICS, Bitcoin has a deeply flawed long-term security model. Its block reward, which constitutes a subsidy for its security budget, halves every four years. Unless the halving of the security subsidy is made up for by additional transaction fees, Bitcoin's security decreases. Given that Bitcoin blocks are full - with only a little space left for further optimizations via SegWit adoption and Schnorr signatures - transaction volumes cannot appreciably increase, and thus the only mechanism by which total transaction fees can increase is by the average fee per transaction increasing. I can't see any way for transaction fees to ever reach the fantastical sums (e.g. $2,000 per transaction) needed to keep Bitcoin secure when the block subsidy becomes insignificant. This wasn't the case back in 2015 when Bitcoin still had the hope of undergoing a hard fork to raise the protocol limit on its block size, which would have enabled it to increase the volume of transactions it processes by orders of magnitude. But now its governance structure is firmly captured by anti-hard-fork parties, so I see no long term viability in its protocol.
- martinko 6y agoBitcoin's security does not need to keep going up indefinitely. It will reach an equilibrium where tx fees will be paying for the entire security of the network. As the block size is capped, there will be a market for fees. Hard-forking to remove the block size limit would have profound consequences for the decentralized nature of bitcoin - arguably its most important characteristic.
- CryptoPunk 6y agoMy point is that with a limit of 300,000 or so transactions a day, Bitcoin's average transaction fee would need to be extremely high to match even the current security subsidy, much less one communsurate with a global reserve currency. I don't see any reasonable case for the prediction that Bitcoin's average transaction fee will reach those extreme highs. >Hard-forking to remove the block size limit would have profound consequences for the decentralized nature of bitcoin - arguably its most important characteristic. I didn't say "remove". I said "raise".
- 6y ago
- jcfrei 6y agoIt's just crazy how flush with cash some SaaS companies are. With a current ratio of 2.8 (cash over short term liabilities) it's no surprise they want to diversify a bit.
- awinder 6y agoAs a shareholder of any company, I’d be extremely wary of outlier moves in mechanical business areas like cash management. Maybe there is something real going on there, but holding egads of cash and then putting it in a (by market-cap) fringe alternative is a weird move. It’s maybe interesting, but I’d be highly skeptical, it’s like seeing smoke... I want to find the embers... MicroStrategy moves its cash into Bitcoin; shares up 9% Oh go home 2020, you’re drunk.
- Proven 6y agoClueless fools. Bitcoin has no use case except speculation. Not exactly what a smart person would accumulate. It was silly at 100 bucks, because future use cases looked weak. Years later, each costs 11,100 and it's certain there won't be any use cases. Fools keep piling in, I'll give you that.
- Valentino3 6y agoCorporate treasury speculating on currency. What could possibly go wrong?
- Valentino3 6y ago...elaborating, a corporate treasurer might want to hold some Euros on balance sheet if they expect to have future liabilities or expenses denominated in Euros. That is a hedge. On the other hand, a treasurer that holds Euros because they have reasons to think the Euro will appreciate in value in the future is simply speculating. And using the company's balance sheet to do so. This is looking like a bet. A well-reasoned bet, but a bet nonetheless.
- knodi 6y agoGood luck to them. They'll need it.
- dgudkov 6y agoIf a company like MicroStrategy starts investing in Bitcoin instead of reinvesting in own business it means it has no good ideas how to generate value as a company. In other words, it doesn't believe its own business can generate more revenue than Bitcoin trade. They may be genius Bitcoin traders, but clearly they are no longer Business Intelligence visionaries as they once were. A famous company that now admits it has no future. That's how I see it.
- biggie88 6y agoYup, and their stock price since their 2000s bubble has been completely flat.Why not innovate your way to more value then rely on a fledgling technology that has decades probably to prove itself.