Something strange has happened over the past few months, and it’s been happening right under everyone’s noses – Bitcoin has become centralized.
During the pandemic, one by one listed companies lined up to buy (relatively) cheap BTC, but one outperformed them all. After this morning’s announcement, Microstrategy now holds more than 105,000 total Bitcoin holdings worth around $ 3.5 billion, making the company the world’s second-largest holder of the leading crypto.
These stacked sats, and the implications of being a publicly traded company owning so much, have left many with expectations they might be forced to live up to as markets struggle to find support.
Like many others in the industry, I am a member of many (too) many business groups and collectives in all applications. This week, however, something happened that hadn’t happened before. People began to openly wonder if Microstrategy would “bail out” Bitcoin.
Think about it a bit.
Satoshi Nakamoto, whoever that person (or individuals) was, initially created Bitcoin in response to government bailouts during the Great Recession. The goal, according to Bitcoin’s white paper, was to avoid the development of centralized policies that the creators of BTC said could potentially doom traditional forms of currency such as the U.S. dollar and other failed currencies, including the Russian ruble, the Zimbabwe dollar, etc.
Where it started
Last fall, Michael Saylor, who until recently was a mediocre and relatively unknown CEO with a poor track record and a questionable history of spending company funds – suddenly catapulted into near-celebrity status because he used money that isn’t even technically his own to buy billions of Bitcoin and stake the future of his entire business there.
At first, Microstrategy used cash (cash assets) to buy Bitcoin. Widely praised in the cryptosphere, it has been questioned or seen as insane by many in mainstream markets. Even then, however, as MSTR’s price began to skyrocket, much of that doubt faded – until the company turned to debt issuance to purchase new amounts of BTC.
How are you
China’s growing crackdown on Bitcoin has put significant downward pressure, and with prices now revisiting lows not seen since January, people are starting to look for a white knight, a savior to solve their problems and send BTC more. high. They are increasingly looking for a centralized entity that has the power to create a plan to set a floor price and keep things from getting too out of hand.
Based on MSTR’s entry point at the end of last year, Saylor needs BTC to stay above $ 20,000 to stay profitable. The downward price action on Bitcoin earlier this year led him to ask Microstategy to issue debt (sounds familiar?) To buy more Bitcoin (again, familiar?) In order to support its price (very familiar).
Microstrategy has played the role of a central bank, to some extent, issuing debt to artificially raise the price of an asset deemed systemically important by many. The same people ridiculing the Federal Reserve with memes saying “the money printer is going to brrrr” are celebrating virtually the same stock of a publicly traded company because it aligns with their goals – funny how that works.
Along with worrying about the long-term implications for Microstrategy’s finances and what the fallout would be if the bottom ever fell from the digital asset market, all of this development is the antithesis of Satoshi’s vision.
But, will there be another Bitcoin bailout?
Ryan Gorman is co-founder of Trade The Chain, a global community of Discord traders using AI-powered sentiment indicators and actionable real-time alerts to make more informed trading decisions.
To learn more about Trade the Chain, please visit tradethechain.com