welcome to money is freedom
a podcast
exploring how finance and freedom connect in our lives
created from thoughtful research
and narrated by Notebook LM AI
this series brings you clear
meaningful insights into finance and beyond
welcome to Episode 13
Today we're diving into the bold
and controversial world of Michael Sailor
and micro strategy we'll explore
how Sailor's unprecedented
decision to invest heavily in Bitcoin
has not only redefined corporate treasury strategies
but also sparked significant debate
in the financial world
is this audacious bet
a visionary move towards the future of finance
or does it expose the company to unnecessary risks
join us as we unpack the complexities of Bitcoin
pricing micro strategies
aggressive tactics and what it all means for investors
and the broader financial system
alright let's jump into another deep dive
this time we're gonna be looking at Microstrategy
oh yeah
this company has been making waves with their uh
pretty bold moves in the Bitcoin world for sure
we've got a pretty interesting mix of sources for this
one cool tweets
financial analysis all sorts of stuff fine
our goal is to try and figure out why
exactly they're going all in on Bitcoin
interesting and what it could mean for the rest of us
yeah it's fascinating
they're really kind of blurring the lines between like
traditional finance right
and the crypto world yeah
they're holding something like 1.3% of all the bitcoin
out there wow
like if you think about that
for a second yeah
that's like a massive chunk of digital gold
it is as their chairman
Michael Sailor likes to call it right
and he is a true believer
he is and that's really driving their whole strategy
yeah and it's not just about holding the Bitcoin
it's about building a whole strategy around it
okay so let's try to unpack that strategy a bit
yeah
they're using these things called convertible bonds
uh huh I'll admit when I first saw that in the research
I was like wait what
yeah
but it's actually a pretty clever way to kind of fuel
their bitcoin purchases yeah
essentially
convertible bonds let companies borrow money
right that can later be turned into stock
okay
so it's almost like giving investors a 2 for 1 deal
right they get to earn interest on the bond okay
but they can also potentially profit
if the company's stock price goes up
gotcha so
Microstrategy is using these bonds
to leverage their bitcoin buys
exactly and investors seem to be loving it
they are
they recently issued like $2.6 billion in these bonds
wow and that's more than they initially planned
that's a lot it is
one of our sources Fred Krueger
even tweeted that Microstrategy now makes up like
4% of the entire US convertible debt market seriously
yeah that's huge
it's pretty wild to think about right
yeah but
one source actually had this really interesting take
they were saying Microstrategy is essentially becoming
bitcoin's investment bank interesting
they're raising money from investors
buy in bitcoin
and then their value grows alongside bitcoin's price
I see it's like
they're creating this whole new kind of bitcoin
security that's attracting investors
and that analogy really gets to like
the core of their strategy right
the key here is the spread okay
that's the difference between
the cost of borrowing money right
and the rate at which bitcoin grows okay
so let's say hypothetically bitcoin grows 15% annually
uh huh and microstrateges borrowing cost is 5% okay
that 10% difference right
is their potential profit
I see so in a way
they're betting that Bitcoin will outperform
the cost of the money they're borrowing
exactly but that kind of brings up a question yeah
isn't this whole strategy
then reliant on bitcoin continuing to rise in value
that's a great question what if the price takes a dip
right and that gets to one of the key risks
of this whole approach look
the source actually breaks it down this way right
they consider bitcoin purchases as
like revenue for Microstrategy okay
while interest payments on those bonds
and dilution from Issuan more stock are the costs icy
it's like a totally different way of looking at company
financials
it's like they're operating in their own little world
where bitcoin is king it really is
but this is
all happening against the backdrop of a bond market
yeah that's facing some pretty serious challenges right
exactly
one of our sources pointed out that there's about
$47 trillion wow
stuck in these Lou yielden bonds really
yeah and investors are looking for better returns right
but they're facing all these obstacles
like regulations in risk aversion
so sailor believes bitcoin could be like the solution
you guys a way for that capital to break free
right and find its way to like a more dynamic asset
exactly so
he sees bitcoin as the sort of
escape patch for investors
who are tired of these low returns
but wouldn't institutions need to change
how they view bitcoin for that to actually happen
absolutely institutions are notoriously slow to change
right and there's still a lot of resistance
to fully embracing Bitcoin
which brings us to the potential risks
and criticisms of Microstrategy's approach
right for sure
I mean not everyone is convinced this is gonna work out
of course not
some are worried about Bitcoin's volatility
uh huh what happens if the price crashes right
could Microstrategy even weather that kind of storm
right
and there's also the whole issue of overleveraging okay
they're using a lot of debt to buy bitcoin right
if things go south they could be in a tough spot
yeah
and remember those convertible bombs we talked about
uh huh if Microstrategy's stock price drops too low
yeah bond holders might not convert to stock right
forcing them to either sell bitcoin
potentially at a loss oh wow
or take on even more debt
so it's like this really delicate balancing act
it is and there definitely some loud voices out there
yeah who think this whole thing is gonna blow up
of course Citron Research
for example they're betting against Microstrategy
they all they think the company is overvalued
and headed for a fall
right okay
so we've got this really fascinating
but potentially risk strategy plan out here
we do but what is this all mean for like
the average person listening
that's the question why
should we care about Microstrategy's bitcoin adventure
what it's a great question yeah
and it goes beyond just this one company
or even just bitcoin okay
it's about a changing landscape of finance right
and how technologies challenge
in the way things have always been done
hmm you know yeah
it's a big deal it is a big deal
so Microstrategy is like this test case then
it is for how far this can go yeah
if they succeed it could open the door
for other companies to follow suit absolutely
imagine a world where corporations just routinely hold
bitcoin on their balance sheets right
they could use it for loans yeah
or other financial tools
it could change how businesses operate
and even how we think about money itself
it really could be like a paradigm shift yeah
but on the flip side
if things go wrong for Microstrategy yeah
it could scare off other companies right
and investors who are kind of on the fence
about Bitcoin
so their successor failure could have like
a ripple effect on the entire crypto world
exactly their every move is being watched by investors
regulators wow
everyday people
who are just trying to make sense of all of this
it's like their walk in a tightrope
with everyone holding their breath
it really is
to bring it back to that investment bank idea though
yeah this source also talked about how Microstrategy's
value is tied to Bitcoin's growth
uh huh which makes sense
but isn't that a pretty big gamble
well I mean
bitcoin is known for its price swings
it definitely is a bet yeah
and it's based on the idea that
Bitcoin will continue to appreciate in value okay
over the long term right there
essentially creating this new way to invest in Bitcoin
one that's tied to the performance of a
publicly traded company
so for someone who might be thinking okay
all of this sounds pretty interesting yeah
but what does it actually mean for me right
how would you explain
the significance of what's happening here
I think it's a sign of the times really okay
we're seeing this collision between traditional finance
uh huh and this new world of cryptocurrency right
microstrategy is right in the middle of it yeah
pushing boundaries and challenging the status quo okay
what they're doing
could have implications for all of us yeah
in ways we can't even fully grasp yet
like how specifically like
think about those trillions of dollars we mentioned
right
the ones that are stuck in those low yield and bonds
yeah if even a fraction of that money
finds its way into bitcoin
uh huh fueled by strategies like micro strategies right
it can have a huge impact on the crypto market
yeah and potentially even the global economy
it's mind boggling
to think about the scale of that potential shift
but like you said it's not without its risks
absolutely
there are valid concerns about bitcoin's volatility
uh huh the potential for overleveraging
regulatory uncertainty right
and of course
the criticisms of Microstrategy's strategy itself
like Citron Research shorting the stock right
and you mentioned earlier
that their reliance on
Bitcoin's continued growth is a gamble
yeah so what happens if Bitcoin's price just plummets
that's the million dollar question
isn't it it is
you would put their entire strategy to the test right
remember their revenue as that source pudding
is based on Bitcoin appreciating in value okay
a significant drop could force them to make some really
tough decisions yeah
like selling Bitcoin at a loss
right or take it on even more debt to stay afloat
that could be a slippery slope
it could be and it's something that
potential investors in Microstrategy yeah
need to consider very carefully right
there's a lot of upside potential
but also a lot of downside risk
okay so
we've covered a lot of ground here
from the technical details
of their strategy uh huh
to the broader implications for the financial world
uh huh what I'm still grappling with is
is Microstrategy being incredibly innovative
incredibly reckless or maybe a bit of both
I think that's the question everyone's trying to answer
yeah there's no doubt they're shaken things up
yeah and forcing us to rethink how finance works
it's like they're throwing a wrench
into the gears of the traditional financial system
yeah and just seeing what happens exactly
and the outcome of this experiment
could have significant repercussions
for the future of Bitcoin
you could and potentially the global economy for sure
it's almost too big to wrap our heads around
it is but as we're wrapping up this deep dive
yeah is there one key thing you'd want our listeners to
walk away understanding about microstrategy
hmm and this whole situation
why I think the key take away is
Microstrategy is this fascinating case study
yeah in how the lines between traditional finance
and the world of cryptocurrency
are becoming more and more blurred
for sure you know
they're challenging conventions
and they're forcing everyone to pay attention to
Bitcoin's potential right
for better or worse it's like
there are real world experiment plan out
right in front of us it is
and the results could have ripple effects
we haven't even considered
absolutely as we're wrapping up this deep dive
yeah I wanna leave you with a thought okay
imagine a world where Microstrategy's bet pays off hmm
what would it mean
if their vision of Bitcoin as a mainstream asset
actually comes true
imagine like those trillions of dollars
yeah that are currently sitting in low yield bonds
right flowing into the Bitcoin ecosystem
that's a pretty powerful image
it would be a massive power shift
away from traditional institutions
yeah towards a more decentralized system right
and that raises so many questions yeah
how would governments react to that kind of shift
uh huh would they embrace it or try to control it
what impact would it have on global trade
and economic stability
it's almost too big to wrap our heads around
it is but one thing's for sure
it would make for a pretty fascinating ride absolutely
of course this is just one possible future right
Microstrategy could face setbacks yeah
regulations could tighten
uh huh
or bitcoin itself could face unexpected challenges
exactly it's impossible to predict the future
with any certainty right
but regardless of what happens
Microstrategy has already made a significant impact
I think so too
they've shown
that it's possible to challenge the status quo
yeah and that Bitcoin has the potential
to disrupt traditional systems
their story reminds us that
we're living in a time of incredible change
for sure the future of finance is still being written
and that's what makes it so exciting right
it's a story that's just getting started
and one will be following closely
so keep your eyes on Microstrategy
because the choices they make in the coming
months and years
could have a huge impact on the future of Bitcoin
and maybe even the world I completely agree
it's a story you won't wanna miss
that's for sure alright
that's gonna do it for this deep dive
thanks for joining us