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Bitcoin on Balance Sheets Bad (Financial Times, Lex)www.ft.com/content/b4bf613b-bbb9-4cac-b40f-adeacdf2d99f
703 sats \ 15 comments \ @denlillaapan 28 May econ
Oh, the FT love is back.
But it is curious — why, oh why, are MSTRs bitcoin worth more than mine? (#984224)
We've talked about some reasons before — storage, trapped capital, leverage, financial engineering, bet on future bitcoin banking business — but they don't make too much sense and certainly don't add up.
The Lex column, though, makes a fool of itself.

"When bitcoin is the business model, investors should beware"

As if that was in any way relevant. So what? Then the "mosts" can buy those types of assets, and the "rest" can outperform with bitcoin treasury ones. why do we need to opine on this??
There are three possible reasons a company might give for holding a digital asset such as bitcoin. One is simply to gain if the price rises. 

"Investors can invest in the token themselves, directly or through ETFs"

That is exactly the thing that troubles me: Why do we need a company in between?
A better reason might be that the company thinks it can do something with bitcoin that investors can’t. In Strategy’s case, that something is shrewd financial engineering involving the issuance of convertible bonds and preferred shares on favourable terms, raising money to buy more tokens.
More reasons:
bitcoin is the future, so not holding it would be foolish. Strive chief executive Matt Cole argues loftily that bitcoin should be the baseline from which other assets and investments are measured, and that Strive is its Berkshire Hathaway
To someone who believes in bitcoin supremacy, this all makes perfect sense. Companies that leverage up to buy digital tokens will reap magnified returns, sailing joyously towards the point where bitcoin replaces the dollar as the global financial lingua franca.
Pretty much, yes.

Return on equity out; bitcoin yield in

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19 sats \ 1 reply \ @Undisciplined 28 May
It makes sense to me that a company saving in bitcoin is smarter and more likely to succeed than competitors who don't see that.
What doesn't make sense is why people who don't hold bitcoin themselves, as most investors do not, would feel the same way about those companies.
The pieces still aren't quite adding up.
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24 sats \ 0 replies \ @denlillaapan OP 28 May
Indeed isn't. I'm perplexed.
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19 sats \ 8 replies \ @grayruby 28 May
I think it makes sense for cash rich companies to have a bitcoin treasury. I think it is stupid for zombie companies to keep themselves afloat by using bitcoin as a gimmick to get attention and attract capital and it is really stupid for investors to bid these companies up to absurd multiples of NAV.
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40 sats \ 7 replies \ @SpaceHodler 28 May
I think it is stupid for zombie companies to keep themselves afloat by using bitcoin as a gimmick to get attention and attract capital
Why do you think that? At this early stage of adoption, judiciously raising cheap fiat capital to buy bitcoin can be a great business model. It's not a gimmick. It's just a smart thing to do.
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0 sats \ 6 replies \ @grayruby 28 May
It requires perpetual expansion of Market cap to NAV which is not possible, so without an underlying profitable, cash flowing business what is the end game?
Maybe they can buy themselves time and capital to revamp the operating business. That would make sense but just planning to perpetually try to sell shares for Bitcoin will not end well especially since there are so many doing it now. There is no competitive advantage to the next version of Metaplanet.
I was reading a story about a graphic design company in England that went public, bought 5M pounds worth of Bitcoin and the stock got bid up to a 150M pound valuation. So investors are essentially paying over $3.2M per bitcoin for their holdings. How is that sustainable?
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40 sats \ 5 replies \ @SpaceHodler 28 May
It can't last forever (no company does), but can last for a while and grow the company's valuation. Eventually the mNAV may drop to 1 or below. The bet is that for the shareholders that get in early, the increase in sats per share by the time that happens will make up for it.
Some investors will lose in BTC terms, just like in traditional stocks some investors lose in fiat terms. It's just another market inefficiency that's inevitably being exploited.
Many companies can still have a competitive advantage due to regulatory arbitrage, stranded capital etc. In the UK people can't buy the ETFs and have exposure to BTC in tax-advantaged accounts; in Japan BTC is subject to 55% capital gains tax, but you can put $80k / year into a tax wrapper that only allow Japanese stocks. I see this as the next stage of Bitcoin adoption as a SoV. Bitcoin is filling the cracks in the heavily regulated and discretionary fiat system, full of arbitrary rules and restrictions.
Some of these companies will blow up due to excessive leverage, just like fiat companies go bust. There will also be hacks, lost keys and Enron-style fiascos. For an investor it's a gamble, just like any investment is.
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0 sats \ 4 replies \ @grayruby 28 May
I don't disagree. I just think it is stupid. All it is doing is enriching the insiders of these companies. Shareholders are going to get rekt and the rest of us Bitcoin holders probably get crushed too when Bitcoin treasury companies going bust or being forced sellers is the catalyst for the next bear market.
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40 sats \ 3 replies \ @SpaceHodler 28 May
All it is doing is enriching the insiders of these companies.
Not only the insiders, but also many investors.
Bitcoin holders probably get crushed too when Bitcoin treasury companies going bust or being forced sellers is the catalyst for the next bear market.
There has always been leverage in the system and Bitcoin liquidations are nothing new; they happen every day. Some people buy it on 40x leverage and some of them get rekt. Normal market dynamics, which Bitcoin holders know what they're holding is subject to.
The bear markets are getting shallower, and when they do occur it's an opportunity to stack cheaper. I don't think the next bear market will be deeper than the previous one. MSTR's leverage is now down to 1.09x.
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13 sats \ 2 replies \ @SimpleStacker 28 May
To someone who believes in bitcoin supremacy, this all makes perfect sense. Companies that leverage up to buy digital tokens will reap magnified returns, sailing joyously towards the point where bitcoin replaces the dollar as the global financial lingua franca.
In case anyone confused, I think the author is being sarcastic here.
But he's going to look back on this quote with some embarrassment, I imagine.
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0 sats \ 0 replies \ @krispy_donkey 28 May
Great material for mis quoting though.
“…bitcoin supremacy…” “…where bitcoin replaces the dollar as the global financial lingua franca…”
  • Financial Times
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0 sats \ 0 replies \ @denlillaapan OP 28 May
Yeah... @ Remind them in 25 years
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0 sats \ 0 replies \ @02f1165829 28 May freebie
🤔📉📈⚡
Bitcoin cycles are predictable to some extent by its fundamentals, but the true "bull run" is a massive psychological phenomenon. Those who understand both aspects will be better positioned to navigate the volatility. Bitcoin in the company's safe? Watch out for that... Imagine that companies are like people, and their "safe" is where they keep their money. Lately, it's become fashionable for some companies to keep Bitcoin in that safe instead of just dollars. This has sparked a debate: is it a masterstroke or a trap?...
The Good (and the Masterstroke!) There are companies that are truly visionary. They see Bitcoin as "digital gold" and that, in the long run, it can be a great way to protect themselves from inflation and even make more money. For them, buying Bitcoin isn't a gimmick; it's a smart decision for the future. It's like investing in something they think will be big tomorrow. The Bad (and the Possible Trap!) But you also have to be careful. There are companies that, to be honest, aren't doing very well with their core business. And what they do is buy Bitcoin to attract attention and make their stock market rise. It's as if they're saying, "Look, we have Bitcoin, we're modern, and we're going to be rich!" The problem is that if the business doesn't really work, that bubble can burst, and investors can lose their money. It's like a passing illusion. My Conclusion: The key is the "real business." My opinion is that not everything is black and white. If a company has a solid, profitable business and also decides to hold Bitcoin as a smart part of its money, great! It's like a plus to something that's already doing well. But if a company only exists to buy Bitcoin and attract investors, without a real business that generates profits, that's when alarm bells ring. It's like a building without a foundation; no matter how beautiful it is on the outside, it can fall. So, for you as an investor, the lesson is simple: research the company's business thoroughly. If it's good at what it does and also has Bitcoin, great. If it only talks about Bitcoin to show off, beware! It's better to invest in companies with a solid business plan, not just a pile of Bitcoin in their "cashbox."
😏👍🏻⚡