MicroStrategy Inc. Chief Executive Officer Michael Saylor says the Federal Reserve’s recent relaxing of its inflation policy helped convince him to put the remainder of the enterprise-software maker’s cash into Bitcoin.
“We feel pretty confident that Bitcoin is less risky than holding cash, less risky than holding gold,” Saylor said in an interview.
Before the Covid-19 crisis, the Tysons Corner, Virginia-based company had about $500 million mostly invested in short-term U.S. government securities. Saylor began to question that conventional strategy when yields tumbled in the wake of the pandemic. He estimates that so-called asset inflation will surge to more than 20% a year, eroding purchasing power.
“Once the real yield on our treasury got to more than negative 10%, we realized that everything we are doing on P&L is irrelevant,” Saylor said. “We really felt we were on a $500 million melting ice cube.”
MicroStrategy invested some money in a share buyback and considered real-estate investments, but much of the commercial market has been decimated by Covid, he said. Gold is still being mined, decreasing future returns, unlike the finite amount of Bitcoin to be issued, he said.
So this summer, MicroStrategy became the first public company to invest the lion’s share of its treasury in Bitcoin. In mid-August, the company announced it has purchased $250 million of the cryptocurrency, and on Sept. 15, Saylor bought an additional $175 million. He intends to continue buying with cash from operations.
MicroStrategy likely had an easier time shifting to the controversial coin than other public companies face. Saylor, who co-founded the firm in 1989 when he was just 24-years-old, holds around 73% of the voting shares and almost a quarter of its equity. The company went public in 1998.
This isn’t the first time Saylor has garnered headlines. He lost billions in personal wealth after the shares tumbled when the company was accused by the U.S. Securities and Exchange Commission of overstating results. Saylor reached a settlement in 2000 without admitting or denying guilt.
Other private and public companies will likely get into Bitcoin in the next three to six months, he predicted.
“It will probably be private companies first, because they don’t have as much inertia,” Saylor said. “The public companies our size, then mid-sized companies.”