Bitcoin's Base: Smart Money Accumulates as Early Adopters Take Profit
Bitcoin's Consolidation: A Sign of Strength?
Bitcoin's recent price stability is not a sign of weakness but a period of consolidation, according to MicroStrategy Executive Chairman Michael Saylor.
In a recent "Coin Stories" podcast episode with Natalie Brunell, Saylor stated that the market is undergoing a shift as long-term Bitcoin holders sell portions of their holdings while institutional investors prepare for larger allocations. "If you zoom out and look at the one-year chart, bitcoin is up 99%," he noted. "The volatility is coming out of the asset—that's a really good sign."
Early Adopters and Market Maturity
Saylor described the current market as one where early Bitcoin adopters, who acquired Bitcoin at very low prices, are selling small portions to meet real-world financial needs, such as housing or education. He compared this to early employees of a successful startup selling stock options.
He believes this activity paves the way for corporations and large funds to enter the market as volatility decreases. Saylor dismissed concerns about Bitcoin’s lack of cash flows, emphasizing that many valuable assets like land, gold, and art also lack income streams. He suggests the traditional investment frameworks will eventually adapt.
Bitcoin as Collateral: Re-engineering Credit Markets
A key point in the discussion was MicroStrategy's initiative to transform credit markets by using Bitcoin as collateral, moving beyond the store-of-value concept.
Saylor explained that traditional bonds are "yield-starved" and under-collateralized. Bitcoin-backed instruments can be structured to provide higher yields with lower risk. MicroStrategy’s preferred-stock products—Strike, Strife, Stride, and Stretch—aim to provide investors with yields up to 12%, heavily over-collateralized with Bitcoin.
According to Saylor, this strategy gives Bitcoin cash-flow-like characteristics, allowing it to be integrated into both credit and equity indexes. This method could draw more institutional capital into the Bitcoin ecosystem. As more institutions explore using Bitcoin in innovative ways, the need for secure platforms and smart contract audits becomes paramount. Companies like Codeum provide security audits to ensure the safety of blockchain-based financial instruments.
MicroStrategy and the S&P 500
Saylor addressed why MicroStrategy hasn't yet been included in the S&P 500. He mentioned the firm became eligible this year after accounting rule changes and expects inclusion as the market becomes more comfortable with the Bitcoin treasury model, potentially by late 2024.
Future Outlook: A Transformative Era for Bitcoin
Saylor sees the rise of Bitcoin treasury companies as similar to the early days of the petrochemical industry, with multiple business models and opportunities emerging.
He predicted Bitcoin would continue to appreciate at an average rate near 29% annually over the next two decades, fueling new credit and equity instruments.
In closing, he expressed optimism about Bitcoin and society, highlighting its potential to promote peace, equity, and fairness.