You can add another brick to the “wall of worry” facing the $2.27 trillion crypto market – and it has “Michael Saylor” written all over it.
Saylor runs a company called Strategy, formerly known as MicroStrategy. It was a software company that under Saylor’s leadership has been transformed into what crypto types call a major “hoarder” of Bitcoin.
His strategy goes something like this: He sells company stock and preferred shares while purchasing lots of Bitcoin. Strategy currently holds around 4% of all the available digital assets.
That’s a lot of Bitcoin, around 800,000 of them. With Bitcoin last year hitting all time highs of about $120,000, his investors have done well (60% plus return over the last five years). That is, until recently when shares of Strategy began reflecting the downdraft in digital coins.
The big question: Is Saylor going to turn the current Bitcoin winter into the storm of the century for crypto?
Along the way, there have been plenty of Saylor skeptics; the legendary short seller Jim Chanos is one. Chanos who began shorting Strategy stock last year in an arbitrage play he described on my “Risk and Return” podcast.
Another has been my podcast partner, Bob Sloan, a longtime capital markets professional who now runs S3 Partners, a well-regarded market data firm that is often referred to as the gold standard for investor and trader positioning. Bob has long warned of the dangers that Saylor posed for Bitcoin and crypto in general.
Any market that leans heavily on one investor buying and not selling is courting trouble when that buyer does become a seller, which given the volatility of Bitcoin was always inevitable, Sloan argued.
Or as he put it: “Funding was required to keep his buying going. No funding equals forced selling.”
Bob’s bunny has a good nose (he’s seen plenty of market ructions during his long career). I was reminded of this Monday when my old colleague at the Wall Street Journal, Jonathan Weil, did a deep dive into Saylor’s business model. Weil raised questions about the in-house metrics used by Saylor that, he reports, have overvalued the company’s stock that became his “currency to buy bitcoin.” With that overvaluation comes the likelihood of selling as opposed to buying Bitcoin.
Informed of these sentiments, a press rep for Saylor hasn’t provided any comments as this piece goes to press. But Weil makes a compelling case that Saylor’s strategy has some holes, as did sources including Sloan even before the WSJ piece was published. It’s why the crypto winter is now likely to stick around until next spring as Saylor, the market’s marginal buyer, could become a significant seller to support his stock price.
That’s something he has been loath to do until Monday when Strategy released a filing with the Securities and Exchange Commission that showed he recently sold 3,588 coins worth over $200 million. Ok it’s a sliver of his holdings, and many Bitcoin maxi’s tell me the market is more than Saylor. It includes big Wall Street firms and plenty of long-term investors.
Maybe. Or maybe Saylor’s selling is the start of something bigger and a crypto winter that lasts until next summer.
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