Like many of you, I didn't know about Mirco Strategies before they bought a whole bunch of Bitcoin but went he news broke I paid close attention to the story. If you don't know the story the CEO Micheal Saylor decided to turn the $424 million he had in cash on the companies balance sheet into Bitcoin.
The company now sits with around 38,250 bitcoins in cold storage and have secured their balance sheet for the entirety of the companies existence. While many may think this is crazy and complex and perhaps it is, to me, I see it as a strategic play that could see this company explode in value in the coming years and set off an arms race to follow their lead.
Cash is not a king
We're all pretty aware that fiat is losing its value, while some of us don't see it straight up, most of us can see that the price of goods and services go up each year, that's price inflation. You're not the only one that feels it, we all feel it differently and so too, do businesses who have to pay salaries and buy from suppliers.
In an ideal world, the company treasurer would take the capital on their books an invest it in things like real estate, bonds, share buybacks, R&D, acquisitions to try and earn enough on the capital, so you don't fall behind inflation.
The worst thing you can do is work so hard for money and save up only to see it slip away. Unofruntelty with bond yields so low it becomes harder for savers and companies that run profitable businesses to manage their cash.
High margin business
As a software business, Micro Strategies has a high margin business and continues to pull in around $30 million a year to add to their cash position. So all the cash they earn if they are not ready to reinvest it or picking their moment sits there and earns nothing.
So essentially each year to thank everyone for running a profitable business, you lose money through debasement of the currency.
Micro Strategy, instead of being a debt-based zombie company, is being punished for their prudence and running a business as we all think they should be run, profitably. So what they decided was if the system isn't going to reward them for good behaviour, instead of behaving badly, why not find a system that does reward good behaviour and that was Bitcoin.
Stock price
Micro strategy hasn't done that much over the years, and the stock has been trading sideways for some time now before the lockdowns hit it as hard as many other stocks. The recover has been swift, and as you can see since the announcement, stock prices have picked up.
Owning their stock is an asset, you can hold it, they pay dividends based on their cash flow, and now they're sitting on a reserve asset that gives them so much bargaining power.
Companies that want Bitcoin exposure can now also buy their stock and his now just tapped into a whole new generation and sector of investors.
Competitive advantage
As other companies continue to stack up debt or try to secure their cash position with gold, bonds or even stock buybacks, companies that hold Bitcoin will have an advantage over any of those other strategies.
What Micheal and his team have done, they way they acquired Bitcoin without moving the price gives them massive margin to the downside should Bitcoin drop so they can relax, and plenty of upside exposure to go.
They are now only in a stronger position their debt-funded competitors, but in a stronger position than their cash funded ones too.
If the price rises
If Bitcoins price continues to rise, the profits Micro Strategies will capture on their balance sheet will be insane. They'll be able to use it to leverage capital markets, acquire debt that is collateralized bu their position, acquire competitors upstream and downstream and then use those assets to pay off their debt.
It's a brilliant move and something we can all learn from, I personally am doing the same with my business and personal balance sheet, be it in smaller numbers.
Originally posted on The Bitcoin Manual
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Posted Using LeoFinance Beta
I saw Mirco Strategies joined the accumulation of BTC like Grayscale and co. these are moves that will set these players up big time and no doubt giving them advantage over others.
Posted Using LeoFinance Beta
I think greyscale is just building a vehicle for people to invest in Bitcoin via them, I'm not keen on that kind of rehypothecation. I understand why people would want it, but I prefer holding the real asset.
But it just shows these are just the ones we know of, think of all the private companies buying it up and saying nothing. Who knows how much BTC will be left for retail to pick up, 1 coiner status is going to become harder and harder
Posted Using LeoFinance Beta
At present 1 coiner is already hard not to talk of when accumulation eventually hist up than it is now. Very true on the silent and unknown accumulators, there actually less BTC out there giving it a thought.
Posted Using LeoFinance Beta
Oh, you're telling me, I've only got a few more sats to go before I reach one corner and it was an uphill climb for sure, I regret not going in harder at 3k, but we live and we learn.
Posted Using LeoFinance Beta
I also put my thought on a post on #leofinance. It is surprising that this news did not break as big as it should have been outside of the crypto space. Crypto-enthusiasts like it coz it gave them the much needed reason to demonstrate to others the potential value of BTC in the future. The mainstream media did not pick this news up that much and it shows how unaware they are when it comes to crypto. It also shows they put all crypto into one basket and do not like to think the future scenario crypto people are envisioning is not shared by mainstream community.
Nice article :)
Posted Using LeoFinance Beta
I think that you're right all crypto news just gets thrown on a heap and while we have made some progress since the days of its used to buy drugs, people still haven't gotten past those surface-level arguments. I am not too concerned with it though, it gives me the time I need to benefit, to learn more to buy more at low prices and to incorporate it into my life and business.
By the time the rest catch up, we'll be miles ahead and hoping we will welcome them and teach them the dark arts of crypto
Posted Using LeoFinance Beta
I agree.
That's why let's not worry about if the BTC is 10.9 or 11.1 K. In the end, that price action will not matter unless you are day trader :P
Posted Using LeoFinance Beta
Lol agreed, in fact I only care if the price goes down by a lot so I can buy some cheap BTC otherwise I can't be bothered, just buy in every month put in my ledger and go on with my day
Posted Using LeoFinance Beta
Yeah. That's what I have been doing for the past couple of months. I do need to buy a ledger though. Do you buy whatever the price is or wait for the price to go down?
Posted Using LeoFinance Beta
So I have a standing order that buys on the 1st of every month regardless of the price.
I also have an order that buys 1 Dollar every day so I get exposure to ALL the price changes and average in that way
If it drops by 20% or more I'll make another buy-in that month
Posted Using LeoFinance Beta
That's a nice strategy. Almost like that of Micro-strategy's :P
Posted Using LeoFinance Beta
It'll take a while for fiat to lose its value though. Man I wish I had $424 million just laying around.
Posted Using LeoFinance Beta
If you’re losing 1.75% on a half a billion it doesn’t seem like a while that’s over 8 and a half million loss per year so it’s immediate losses!
Only like 1.75% of the world are aware of the face that they're losing money though. !ENGAGE 20
Posted Using LeoFinance Beta
LOL hopefully people who read my posts are part of that 1% and are doing something about it
I only keep money that I'm going to spend within the next two months in my bank account. Every other money I own is in crypto. Either hive, vite, Ren, lend, or a stable coin like HBD and SBD.
When I look at exchanges, I see Naira going down on the dollar like its Mia Khalifa, and I just smile at the fuckery.
ENGAGEtokens.