Bitcoin’s (BTC-USD) economic ramifications are many. According to Michael Saylor, Bitcoin is an elemental invention like fire or electricity. Bitcoin, like previous discoveries, offers a novel and easy way to store and move energy over space and time. Bitcoin theory (a phrase developed by Saylor, I believe) examines the reasons why Bitcoin has become such a significant and unavoidable worldwide invention. This essay aims to outline the reasoning behind MicroStrategy (NASDAQ: MSTR) and its $2.2 billion debt-financed Bitcoin investment.
MicroStrategy altered its goal to become totally virtual at the start of COVID. The business noted in its latest Q2 financial report that it intends to “exploit the virtual wave to drive more efficiency in go-to-market activities, which improves overall profitability and offers extra resources to spend in research and development.” So far, the full-virtual choice has proven to be a success since MicroStrategy has gradually developed as a business intelligence firm over the last year.
The digital asset strategy is an important part of MicroStrategy’s full-virtual mentality. MicroStrategy has risen to become the world’s largest corporate holder of digital assets after deciding to use Bitcoin as its principal treasury reserve asset. MicroStrategy now owns 108,992 Bitcoins, is $2.2 billion in debt, and pays 1.5% interest. Michael Saylor recently told CNBC, “Our point of view is to be a leveraged, Bitcoin-long corporation.”
MicroStrategy stock has increased 400% in the last year. MicroStrategy’s stock is favorably associated with Bitcoin’s price performance due to the company’s huge debt-financed Bitcoin acquisitions.
Bitcoin has grown fundamental to MicroStrategy’s business approach during the last year. The corporation believes Bitcoin will continue growing and said it would never sell its BTC holdings. The majority of MicroStrategy’s approximately $2 billion in debt is held as convertible notes, with the remainder paid off via the company’s continuous successful growth. MSTR stock has become the de facto mechanism for legacy investors to obtain exposure to Bitcoin as a result of MicroStrategy’s leveraged Bitcoin position.
MicroStrategy, as a virtual business intelligence company, understands the intricacies of the current online scene. The corporation prefers a long-term, macroeconomic perspective on the economic implications of emerging technology. The assumption that Bitcoin will become the internet’s primary asset for value storage is key to their viewpoint. Understanding the implications of Bitcoin adoption helps one imagine what the internet will look like in the next 5-10 years.
To comprehend the economic consequences of the Bitcoin network, Bitcoin theory employs economics, philosophy, natural science, and history. First and foremost, Michael Saylor considers Bitcoin to be the finest long-term store of value currently available. His rationale is based on a variety of circumstances, which I will briefly outline with three key comparisons. However, Saylor has developed a simple method to assess Bitcoin’s overall success, which leads to his firm’s success. The following is the formula:
Bitcoin’s value = adoption + utility + productivity + inflation
This method divides Bitcoin’s value into four pieces. However, it fails to explain the fundamental forces driving Bitcoin’s continual rise. That is, in order to truly comprehend Bitcoin’s potential impact, more than simply statistics must be considered. By looking at Bitcoin from a macro perspective, one better grasps the network’s non-quantitative and less quantifiable social value. This macro-level grasp of Bitcoin is the driving force for MicroStrategy’s large Bitcoin acquisitions.
A macroscopic grasp of the network is required if you are interested in Bitcoin. Bitcoin is a new, government-independent asset that gives sovereignty without relying on a central authority. Those looking to leverage their Bitcoin position and take advantage of Saylor’s $2 billion in debt purchases should consider investing in MicroStrategy. It is best to describe Bitcoin with meaningful analogies to avoid technicalities and form a fundamental understanding. The following comparisons are based on Michael Saylor’s various interviews and podcast appearances.
Bitcoin as an Unstoppable Organism
Everything in the cosmos exists as a result of protocols that generate emergent features. For example, the universal gravity protocol results in the existence of planets. Life begins as a result of the genetic protocol, or DNA, that urges cells to develop greater awareness. Along this line of thought, Bitcoin represents a new type of ‘life’ in the digital universe. The Bitcoin network uses a self-replicating decentralized system that incentivizes humans to keep it alive. As a result, the network as a whole is larger than the sum of its parts, and it cannot be killed.
As Michael Saylor has frequently stated, Bitcoin’s indestructibility is a crucial feature that makes it an outstanding long-term investment. Throughout history, technological defensive features have consistently been more essential than offensive attributes. Because Bitcoin’s protection is unrivaled, it can endure and alter the world without suffering any harm. To compare the concept to nature, Saylor frequently refers to the Bitcoin network as an impermeable and regenerating colony of bees.
Bitcoin as an Internet Nation
One of the main reasons for America’s worldwide success over the last 150 years has been its strong defense and easy access to free commerce. America’s great control over naval and airspace allows them access to this commerce. Control over these critical areas has historically helped governments to acquire an advantage over one another. For example, Britain retained worldwide dominance throughout colonial times due to its control over the seas. Because Britain dominated the oceans, it had the fewest restrictions on unrestricted commerce and so amassed the most money. The internet is today’s “sea.” To regulate international cash movement now and in the future, one must retain control over the internet.
Technology has always been the driving factor behind governments’ ability to dominate territories, amass money, and affect people. Unfortunately, this national rule has been maintained by the threat of violence for the whole period. What distinguishes Bitcoin’s technology is that it provides individuals the power of control — the power of property rights — without the use of violence. As a result, cryptocurrencies exist as a peaceful alternative to oppressive regimes. As we progress deeper into the digital age, governments will find it increasingly difficult to exercise supervisory control over assets. Bitcoin and other cryptos may be viewed as opt-in nation-states that provide individuals with the sovereignty they innately desire.
To emphasize the point, Bitcoin is the first private property right that is independent of government. Security, more than anything else, is the United States’ most important export. Bitcoin offers the same level of security as America, with the exception that it does not levy taxes and does not maintain an underlying threat of violence. In this sense, the Bitcoin network may be viewed as a country of people whose rights are safeguarded by mathematical cryptography rather than through violence.
Bitcoin as a Protocol for Perfect Competition
Gold has been the finest commodity for storing human energy across time over the last thousand years. However, basing a monetary system on a tangible product presents a game-theoretical difficulty. The issue is that under a commodity-based monetary system, human creativity is diverted to making the underlying asset worse as a means of storing value. In a gold-based monetary system, for example, if the value of gold rises, human creativity is focused on finding new ways to generate more gold. In contrast, increasing supply in a crypto-based economy is logically impossible. As a result, human inventiveness is channeled more productively with crypto-based money. Bitcoin efficiently generates a social consensus of people who are primarily focused on wealth creation by removing superfluous inflationary distractions.
Bitcoin is still a very new technology. It might take a lot of time and effort to understand one’s role in a society completely. Steadfast Bitcoiners describe this learning process as building a knowledge of ‘Bitcoin theory.’
Michael Saylor regularly uses the comparisons I’ve presented in public interviews. Saylor just learned about Bitcoin in 2020, but his history in technology revolutions prompted him to go “all-in.” I advise anyone interested in learning more about Bitcoin to listen to Saylor’s in-depth audio appearances. Saylor is adept in simplifying Bitcoin’s complexities with everyday language throughout these speeches. If you want to invest in MicroStrategy, keep in mind that you will be taking a leveraged Bitcoin position.