In brief

  • Bitcoin is a logical solution to the store of value problem, said MicroStrategy CEO Michael Saylor.
  • Looking at the last 10 years, Bitcoin is not volatile at all—it's just going up, he claimed.
  • Bitcoin is a 10-year investment for MicroStrategy.

In the current environment of monetary inflation, Bitcoin (BTC) is a logical solution to the store of value problem, said Michael Saylor, CEO of business intelligence firm MicroStrategy, during Binance Blockchain Week today.

Saylor explained that the company’s traditional strategy was to invest in sovereign debt, but recent aggressive monetary expansion caused by the coronavirus pandemic prompted MicroStrategy to look for alternative stores of value.

As the firm was looking at a potential loss of roughly 15% of shareholder value on the cash balance per year, it considered investing in sovereign debt, stocks, derivatives, real estate, and precious metals—but they just didn’t cut it in terms of returns compared to Bitcoin.

“The returns on gold didn’t look nearly as compelling as Bitcoin,” said Saylor, adding, “So we eventually found crypto because, in essence, in the crypto world you can create a digital gold—and Bitcoin is that digital gold. And so if you’re looking for a non-fiat derivatives store of value in an inflationary environment, that’s logical that you would settle upon Bitcoin as digital gold.”

Speaking about Bitcoin’s notorious volatility, Saylor said that MicroStrategy is not a trading company and thus is not concerned with short-term fluctuations of price on a day-to-day basis. On the contrary, the company’s Bitcoin purchase is actually a long-term investment.

“But we are making a 10-year investment, and if you look at Bitcoin over the course of 10 years, it’s not volatile at all—it’s just going up,” Saylor explained.

He added that it really comes down to time preference, and if you’re an investor, then you probably have at least a four-year time horizon, in which case near-term volatility “isn’t really consequential.”

“If we wanted to avoid volatility, we could keep the cash, but we’d be 90% certain that we would lose 75% of our value over 10 years, right. That’s the price of stability. Volatility is the price you pay in order to get appreciation,” Saylor asserted.

Saylor acknowledged that if he was asked about Bitcoin in February of 2020, for example, he would have said that Bitcoin is just “some kind of nuisance cyber digital crypto thing.” He admitted that his “mind was elsewhere” but while he wasn’t well educated on the subject of Bitcoin just a year ago, his sentiment towards crypto has changed drastically since then.

“I think Bitcoin is a solution to a problem—but you have to have the problem to appreciate the solution. So the problem became pretty paramount in March. When the cost of capital goes from 5% to 15% for every company on Earth, now you have to find a treasury solution that would yield more than 15%,” said Saylor.

And Bitcoin can act as a store of value against monetary inflation for any corporation, public or private, with a cash-rich treasury—because they all have a debasement problem, he said, adding that it’s “a logical solution to the store of value problem.”

As Decrypt reported, MicroStrategy was one of the traditional finance companies that recently paved the way for institutional investments in Bitcoin. The firm invested $425 million in Bitcoin between August and September last year and later even sold $650 million in debt securities to buy some more BTC. Not that it was enough.