The speaker discusses the guilty verdict of Sam Bankman-Fried on fraud charges and its implications for the crypto industry. They highlight the need for experienced entrepreneurs and reliable custodians in the industry.

Verdict in the Sam Bankman-Fried FTX Case

The speaker emphasizes the importance of Bitcoin as the foundation for a more stable and scalable ecosystem. They mention the role of public companies, institutional money managers, and regulated banks in this transition.

Transition to a Bitcoin-based Ecosystem

The speaker discusses the significance of a Bitcoin ETF for mainstream retail and institutional investors. They differentiate MicroStrategy as a unique investment vehicle and highlight the benefits of intelligent leverage and tax-deferred Bitcoin premium.

Potential Impact of Bitcoin ETF Approval

The speaker explains how the introduction of ETFs will accelerate education efforts and adoption in the crypto space. They emphasize the advantages of MicroStrategy's fee-free structure and ability to generate tax-deferred Bitcoin premium.

Expanding the Crypto Ecosystem with ETFs

The speaker discusses the volatility and performance of Bitcoin compared to other assets. They highlight the importance of volatility for vitality and express preference for Bitcoin's potential returns over stability.

Volatility and Performance of Bitcoin

The speaker identifies Bitcoin hodlers as the natural buyers in the market, while miners are the natural sellers. They discuss the decrease in trading volume and anticipate that the introduction of ETFs and the upcoming halving will impact the asset class.

Natural Buyers and Sellers in the Crypto Market

The speaker discusses the potential for capital markets activity through an ATM equity offering and its impact on MicroStrategy's Bitcoin holdings. They highlight the benefits of capturing a tax-deferred Bitcoin premium for shareholders.

Capital Markets Activity and Bitcoin Holdings

- Sam Bankman-Fried, founder of FTX, has been found guilty on 7 counts of fraud, marking an important milestone in the growth and maturation of the crypto industry.
- The crypto industry has faced issues with inexperienced entrepreneurs, unreliable custodians, and incompetent creditors, leading to bankruptcies.
- The future of the industry will be based on Bitcoin, with public companies, institutional money managers, and regulated banks playing a significant role.
- The introduction of a spot Bitcoin ETF could benefit MicroStrategy and other companies, allowing mainstream investors to participate and increasing capital flow.
- MicroStrategy is different from an ETF as it doesn't charge a fee and can use leverage and generate a tax-deferred Bitcoin premium.
- The introduction of ETFs will accelerate education and adoption efforts in the crypto space.
- Bitcoin's volatility is seen as a positive, as it has the highest returns compared to other assets like gold.
- Retail players have been flushed out of the market, and the natural buyers are Bitcoin hodlers. ETFs and the upcoming halving are expected to bring in mainstream investors.
- MicroStrategy may consider raising funds through an ATM equity offering to add to their Bitcoin holdings, as it has been accretive to shareholders in the past.

MicroStrategy Executive Chair Michael Saylor discusses what the Sam Bankman-Fried verdict and a spot Bitcoin ETF could mean for the crypto industry on "Bloomberg Markets: The Close."

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A verdict in the Sam Bankman-Fried FTX case being found guilty on 7 counts of fraud.

We'd love to hear your reaction to that ruling and what it potentially means for the crypto industry going forward.

I think it's an important milestone in the growth and the maturation of the industry.

The crypto industry has been plagued by inexperienced entrepreneurs like Sam, unreliable custodians like FTX, incompetent creditors, A dozen went bankrupt in the last year or 2.

And their failure is a necessary rite of passage for an industry that's going to lead to a new, more stable, more scalable ecosystem that will be based on Bitcoin.

Public companies like Block, MicroStrategy, marathon, a dozen Bitcoin miners that are public, institutional money managers like Fidelity and BlackRock and regulated banks when they eventually become custodians.

The offshore crypto exchanges, the stable coins, the crypto tokens, the DeFi projects, they're gonna shrink, fade into the background, and decouple from mainstream and institutional digital assets marketplace that'll be based on Bitcoin.

And Michael, you bring up BlackRock, you bring up Fidelity, and of course, both of those firms have applications and for a spot us Bitcoin ETF something that hasn't been approved yet but there's a lot of speculation a lot of optimism that it could be soon.

What would that mean for micro strategy given that.

I mean you've been on the record too saying that MicroStrategy shares are a proxy for Bitcoin if you're able to get that through a physically backed ETF would that lessen the premium that MicroStrategy enjoys?

I think it's critical for there to be a spot ETF for mainstream retail investors and mainstream institutional investors to participate.

So it's going to lay a base layer that's going to allow large amounts of capital to flow into the industry.

MicroStrategy is a special investment vehicle for Bitcoin long bulls.

We're different from an ETF because we don't charge a fee.

We borrowed $2.2 billion at 1.6% interest to buy Bitcoin.

And we can generate a tax deferred Bitcoin premium.

Either by using cash purchased by cash purchases or by capital markets activity.

So we're not for everybody and in sovereign wealth funds that want to buy 50 billion dollars worth of Bitcoin can't fit into the micro strategy capital structure.

But if you want leverage and this tax deferred yield and no fee then we're an interesting alternative for people in the space.

With regards to building up that position, that crypto position, even further than what you have, does the introduction of those ETFs, would that create competition to increase asset sizes?

I think it's going to help everybody in this space.

They're going to accelerate education efforts and adoption.

Already you can see Fidelity analysts are making a huge impact on the digital asset space.

So as you see Wall Street analysts from all these ETF firms and you see their education and marketing efforts come into the space.

And as they provide the rails for traditional institutional investors and endowments and the like to engage they're going to expand the entire ecosystem.

And they can't engage in cash purchases with operating income like we can in order to generate that tax-deferred Bitcoin premium.

It's interesting too to see some of the moves in Bitcoin this year.

Obviously the volatility is still there but not necessarily to the extremes that we saw in prior years.

And I'm wondering if the introduction or the broadening out of the user base will reintroduce that volatility or have we kind of moved past that are we kind of in a different era now.

Well I think we've reached a nice point but you know when Bitcoin blast pass a thousand hundred thousand dollars to 200000 dollars maybe it'll trade from 250000 down to a hundred and 75000 and people are going to be screaming the end again.

Bitcoin is is compounding at 40 to 50 percent annualized growth rate for the past 3 and a quarter years since MicroStrategy got into the space with a lot of volatility.

I think an analyst Timmer from Fidelity pointed out it is got the highest volatility of any asset but it's also got the greatest return.

And So as I've said in the past, volatility is vitality.

I'd rather have the volatility and the performance than get rid of the volatility.

Gold's not volatile but it's also down 1 percent in 3 and a quarter years.

Well Michael I want to talk a little bit more about the user base of crypto who's actually buying because of course if you take a look at the the trading market you've seen trading volume absolutely fall off the clip in the narrative I keep hearing is that you've had all these retail players flushed out after what we saw with FTX a year ago so maybe a spot Bitcoin ETF is in the offing but do you think that that would actually bring back in those marginal buyers those retail players or have they been burned too badly.

Yeah I think that during this crypto meltdown the crypto bros offshore and the leveraged hedge funds they exited the space.

They were all bankrupted for the most part.

Right now the natural buyers in the space are Bitcoin hodlers.

The maximalists the people they're sweeping their incremental cash flows into Bitcoin.

It's almost impossible, very difficult for mainstream investors and mainstream retail to buy Bitcoin because there are just very few on ramps.

So the natural sellers are the miners, the natural buyers are the hodlers.

The trading volume has diminished quite a bit.

Once we get these ETFs in place, that will open up the gateway for mainstream retail and mainstream institutional capital to flow.

And the having in April is going to cut the available supply in half and is going to eliminate half of the natural selling.

So this next 4 month period is very pivotal to the asset class.

I want to talk about your own Bitcoin holdings.

I have to give credit to Tom Contigliano in our newsroom for this.

You take a look at page 21 of the latest 10 Q.

It mentions that MicroStrategy could raise just over 600 million dollars in an ATM equity offering.

Is that something you're thinking about tapping you take a look at the shares right now they're up over 200% year to date could you use that to add more to your Bitcoin funds here.

We have raised more than a billion dollars in the past via ATM offerings.

And whenever we did it it was accretive to our shareholders.

This 600 million dollar vehicle will allow us to engage in more capital markets activity.

You know As we're selling stock at a premium and then buying the underlying Bitcoin, we're capturing a tax deferred Bitcoin premium for our common stock shareholders.

So We're very thoughtful about when we do that and how we do that and sometimes we'll do it sometimes we won't it depends on market conditions and you know and where everything turns out.


Speaker 0: A verdict in the Sam Bankman-Fried FTX case being found guilty on 7 counts of fraud. We'd love to hear your reaction to that ruling and what it potentially means for the crypto industry going forward.

Speaker 1: I think it's an important milestone in the growth and the maturation of the industry. The crypto industry has been plagued by inexperienced entrepreneurs like Sam, unreliable custodians like FTX, incompetent creditors, A dozen went bankrupt in the last year or 2. Unscrupulous promoters. And their failure is a necessary rite of passage for an industry that's going to lead to a new, more stable, more scalable ecosystem that will be based on Bitcoin. Public companies like Block, MicroStrategy, marathon, a dozen Bitcoin miners that are public, institutional money managers like Fidelity and BlackRock and regulated banks when they eventually become custodians.

The offshore crypto exchanges, the stable coins, the crypto tokens, the DeFi projects, they're gonna shrink, fade into the background, and decouple from mainstream and institutional digital assets marketplace that'll be based on Bitcoin.

Speaker 0: And Michael, you bring up BlackRock, you bring up Fidelity, and of course, both of those firms have applications and for a spot us Bitcoin ETF something that hasn't been approved yet but there's a lot of speculation a lot of optimism that it could be soon. What would that mean for micro strategy given that. I mean you've been on the record too saying that MicroStrategy shares are a proxy for Bitcoin if you're able to get that through a physically backed ETF would that lessen the premium that MicroStrategy enjoys?

Speaker 1: I think it's critical for there to be a spot ETF for mainstream retail investors and mainstream institutional investors to participate. So it's going to lay a base layer that's going to allow large amounts of capital to flow into the industry. MicroStrategy is a special investment vehicle for Bitcoin long bulls. We're different from an ETF because we don't charge a fee. We can use intelligent leverage.

We borrowed $2.2 billion at 1.6% interest to buy Bitcoin. And we can generate a tax deferred Bitcoin premium. Either by using cash purchased by cash purchases or by capital markets activity. So we're not for everybody and in sovereign wealth funds that want to buy 50 billion dollars worth of Bitcoin can't fit into the micro strategy capital structure. But if you want leverage and this tax deferred yield and no fee then we're an interesting alternative for people in the space.

Speaker 2: With regards to building up that position, that crypto position, even further than what you have, does the introduction of those ETFs, would that create competition to increase asset sizes?

Speaker 1: I think it's going to help everybody in this space. They're going to accelerate education efforts and adoption. Already you can see Fidelity analysts are making a huge impact on the digital asset space. So as you see Wall Street analysts from all these ETF firms and you see their education and marketing efforts come into the space. And as they provide the rails for traditional institutional investors and endowments and the like to engage they're going to expand the entire ecosystem.

But they're not an operating company. They can't take on leverage. They can't not charge a fee. I mean, we literally don't charge a fee. And they can't engage in cash purchases with operating income like we can in order to generate that tax-deferred Bitcoin premium.

Speaker 2: It's interesting too to see some of the moves in Bitcoin this year. Obviously the volatility is still there but not necessarily to the extremes that we saw in prior years. And I'm wondering if the introduction or the broadening out of the user base will reintroduce that volatility or have we kind of moved past that are we kind of in a different era now.

Speaker 1: Well I think we've reached a nice point but you know when Bitcoin blast pass a thousand hundred thousand dollars to 200000 dollars maybe it'll trade from 250000 down to a hundred and 75000 and people are going to be screaming the end again. So I. Bitcoin is is compounding at 40 to 50 percent annualized growth rate for the past 3 and a quarter years since MicroStrategy got into the space with a lot of volatility. I think an analyst Timmer from Fidelity pointed out it is got the highest volatility of any asset but it's also got the greatest return. And So as I've said in the past, volatility is vitality.

I'd rather have the volatility and the performance than get rid of the volatility. Gold's not volatile but it's also down 1 percent in 3 and a quarter years. So that's not what we're looking for.

Speaker 0: Well Michael I want to talk a little bit more about the user base of crypto who's actually buying because of course if you take a look at the the trading market you've seen trading volume absolutely fall off the clip in the narrative I keep hearing is that you've had all these retail players flushed out after what we saw with FTX a year ago so maybe a spot Bitcoin ETF is in the offing but do you think that that would actually bring back in those marginal buyers those retail players or have they been burned too badly.

Speaker 1: Yeah I think that during this crypto meltdown the crypto bros offshore and the leveraged hedge funds they exited the space. They were all bankrupted for the most part. Right now the natural buyers in the space are Bitcoin hodlers. The maximalists the people they're sweeping their incremental cash flows into Bitcoin. It's almost impossible, very difficult for mainstream investors and mainstream retail to buy Bitcoin because there are just very few on ramps.

So the natural sellers are the miners, the natural buyers are the hodlers. The trading volume has diminished quite a bit. This is the law before the storm. Once we get these ETFs in place, that will open up the gateway for mainstream retail and mainstream institutional capital to flow. And the having in April is going to cut the available supply in half and is going to eliminate half of the natural selling.

So this next 4 month period is very pivotal to the asset class.

Speaker 0: I want to talk about your own Bitcoin holdings. I have a very detailed question for you. I have to give credit to Tom Contigliano in our newsroom for this. You take a look at page 21 of the latest 10 Q. It mentions that MicroStrategy could raise just over 600 million dollars in an ATM equity offering.

Is that something you're thinking about tapping you take a look at the shares right now they're up over 200% year to date could you use that to add more to your Bitcoin funds here.

Speaker 1: We have raised more than a billion dollars in the past via ATM offerings. And whenever we did it it was accretive to our shareholders. This 600 million dollar vehicle will allow us to engage in more capital markets activity. You know As we're selling stock at a premium and then buying the underlying Bitcoin, we're capturing a tax deferred Bitcoin premium for our common stock shareholders. So We're very thoughtful about when we do that and how we do that and sometimes we'll do it sometimes we won't it depends on market conditions and you know and where everything turns out.

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MicroStrategy's Saylor on Bankman-Fried, Bitcoin ETF