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19 sats \ 8 replies \ @grayruby 28 May \ on: Bitcoin on Balance Sheets Bad (Financial Times, Lex) econ
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.
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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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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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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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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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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