You’ll need to block off about 80 minutes to watch this whole thing, but it’s well worth your time as a lesson in economics. It’s an interview Tucker Carlson did with tech entrepreneur Michael Saylor in December in which Saylor gives a full argument for Bitcoin and cryptocurrency – why it’s needed, what it means, where it fits in the spectrum of investment assets.
Saylor is the founder, CEO and majority owner of MicroStrategies, a tech firm which does data mining and business intelligence. He’s a billionaire, obviously, but an unusual one in that he still owns most of the company he built despite the fact it’s public.
Saylor is unusual in another way. Back in 2020, when the federal printing presses began running full bore in debasing the U.S. currency, he decided that MicroStrategies’ cash holdings needed to be moved into something which wouldn’t depreciate the way cash inevitably would in the face of the inflation that was coming. So he bought $250 million in Bitcoin in August of 2020. Then another $175 million in Bitcoin in September of that year. Then another $50 million in December of 2020. Saylor wasn’t done – MicroStrategies took on debt to buy more Bitcoin and now has over $1.1 billion invested in it.
So if you’re going to find somebody who believes in Bitcoin to explain what it is, you can’t really get much better than Michael Saylor.
Carlson brings him on to explain cryptocurrency, and he does that. So much so that we’re putting up this post more as education than news.
Not your education, really. Ours. Because before hearing Saylor we didn’t really understand the point of cryptocurrency.
Our objection to crypto is, or was, based on a literal understanding of it – that it’s currency. We looked at it and said “the problem is that it’s currency that isn’t based on anything but mathematical equations, and that you can’t spend it.”
But it isn’t really currency. Saylor explains that it’s more like gold. It’s a savings tool. And the reason it’s good for that purpose is that there are only 21 million Bitcoins, period. There are no more of them which are going to be “printed” – Bitcoin is a network which is decentralized and nobody has the authority to create more of them – though there is a complex process by which Bitcoins can be “mined.” All 21 million Bitcoins have not been put into circulation yet, and the “mining” process simply gets closer to that magical 21 million number by self-regulating all Bitcoin transactions (hit the link above to see how that works).
He notes that gold, despite being the standard for currency for most of world history, is not capable of holding its value in such a way. They’re mining, minting and trading in gold all over the world, and the supply of it is ever-expanding as it’s pulled out of the ground and put into circulation. When the supply expands, the value of gold holdings diminishes. But with Bitcoin, that doesn’t happen, because there are 21 million Bitcoins and that’s it.
What happens when the demand for something increases but the supply doesn’t? It gets more expensive. Saylor’s analysis holds that Bitcoin, and probably lots of other cryptocurrencies like Ethereum and Dogecoin, for example, but Saylor is only invested in Bitcoin, is the perfect hedge against inflation. In fact, the more the dollar is devalued the better Bitcoin investors do.
Of course, this is over the long haul. If you’re a short-term investor Bitcoin can give you massive indigestion. The price of a Bitcoin had run up to $20,000, for example, by late 2017 and then crashed to around $4,000 by the summer of 2019. But by November of last year it hit $69,000 before tumbling to around $38,000 now. Bitcoin prices are dropping because the Federal Reserve says it’s going to raise interest rates.
Saylor hasn’t sold any of his Bitcoin holdings, or at least reportedly he hasn’t. He’s in it for the long haul.
This interview, which is really more like a speech interrupted very rarely by Carlson, goes through the basis for currency dating back to the beginning of time – Saylor says currency is a store of economic energy, much like steel is a store of mechanical energy, and what Bitcoin represents is a pristine store of that economic energy because it can’t degrade.
We’re not sure he’s right about that. Saylor says Bitcoin can’t be hacked. If he’s right about that, perhaps his argument about the purity of Bitcoin holds a lot of water. But can it be banned by governments? China is banning it, so there’s that. We’re struggling to understand how governments could ban cryptocurrencies, though, without essentially shutting down the internet. If Congress passed a law today banning all cryptocurrency people would simply buy it offshore or underground; the real issue would then become how they could liquidate it when the time came.
But where there’s a will, there’s a way.
The other more stable investment vehicle is real estate. But there are problems with real estate. Buy real estate in a city, for example, and you could be at the mercy of its government. There are lots of property owners in places like Baltimore, Detroit, Newark and Jackson, for example, who lost their shirt. Not to mention you have to spend money on maintaining a real estate property, and then there are property taxes. Obviously real estate still ranks as a “safe” investment, but it isn’t a perfect store of value. Saylor defends Bitcoin as better than real estate because it costs nothing to own once you have it.
The detractors from cryptocurrency say this is no different from the Dutch tulip craze of the 1630’s, in which the whole country commoditized tulip bulbs and plowed a significant chunk of its wealth into them, ultimately leading to a massive collapse in value. But Bitcoin has already been around longer than the tulip craze lasted and it’s still generally gaining value over the long haul, the recent downturn since November notwithstanding. And the nature and infrastructure of cryptocurrency is more secure and self-regulating than flowers in Holland ever were.
We’d be willing to bet on crypto over the long haul, because of one key reason – it doesn’t depend on the intelligence and discipline of the political class. Right now, given the continued debasement of the dollar and the resulting destruction of what used to be safe assets like CD’s and other savings vehicles, some stable store of value not dependent on the government is needed. As Saylor says, that you essentially have to gamble on the stock market just to avoid losing your savings as the currency is debased.
Here’s the interview. It’s well worth your time.