At long last, the candidates for why a pot of bitcoin is worth 1.9x itself on Wall Street is pouring in! (#984185, #975448).
"MicroStrategy Inc.’s core discovery is that the US stock market will pay $2 for $1 worth of Bitcoin."
It's curious, and very un-cypherpunk-y (#984185), but somehow wrapping a bitcoin in a corporate shell and smashing some leverage on top makes that same bitcoin more valuable (#979485).
One prime reason is that investors expect these financially engineered vehicles to keep earning BTC yield, that is: they can keep on raising money to buy BTC, harvesting vol, issue convertibles, tap into pools of funds that otherwise couldn't buy bitcoin straight. (#955110)
Another is that there is plenty of trapped capital in 401(k) accounts, or fund managers with specific mandates that can only own equity or bonds etc.
Those are good enough reasons, at least to my mind, to explain why there is some discrepancies in pricing between these not-identically correlated markets (= bitcoin inside and outside Wall Street, inside and outside corporate vehicles).
...and Here's a new one: STORAGE AND SAFETY
I think sometimes about the term structure of crypto futures. Buying a Bitcoin for delivery in seven months costs about $4,000 (3.8%) more than buying a Bitcoin today. Some of that is time value of money ... but some of it is what I have half-jokingly referred to as storage costs. If I buy a Bitcoin future, I don’t have to put the Bitcoin anywhere for seven months; if I buy an actual Bitcoin, I do have to store it.
Now, you say, that's not particularly difficult: buy a hardware wallet, store some seed phrases, make copies, memorize 12 words etc. Easy peasy.
...yes. But you forget the sophisticated burglars, having stolen your withdrawal history from an exchange and found your physical address, about to wrench attack you:
Bitcoin is electronic and storing it just means remembering the password. But it turns out that storing your Bitcoins is very expensive. You have to remember the password and pay bodyguards.
Given the well-publicized attacks in France, and Coinbase leaking client data, Jameson Lopp expressed his worries to the Wall Street Journal:
“A lot of people are getting to the hide-your-gold-under-the-mattress level of security,” said Jameson Lopp, the co-founder of bitcoin security company Casa. “But if you are a high-profile person…that’s when you have to worry about the physical attack.”
But burglers and $5 wrench attackers can't get my MSTR shares, because they're not self-custodied! They sit in a database at Depository Trust & Clearing Corporation, safely hidden away from kidnappers and thieves!
Ha-haaa, checkmate "decentralized" finance!
Levine concludes:
I am perpetually baffled by the fact that MicroStrategy Inc. (1) is a publicly traded pot of Bitcoin and (2) trades at roughly twice the value of its Bitcoins. But presumably you won’t get kidnapped for your shares of MicroStrategy; perhaps that is worth paying a premium for.
Nuff said.
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<wherever one resides>, it clearly doesn't matter whether someone self-custodies, or pays Coinbase to do it?