MicroStrategy’s Bitcoin Conference, Part Deux

A roundup of Day 2 + the pitch for Corporate Adoption

The highlight of Day 2 was Saylor’s morning keynote, ‘There is No Second Best.’ Despite the extreme scarcity of Bitcoin, there is no scarcity of Michael Saylor’s public opinions about Bitcoin online. You can listen to several hundred hours of podcasts, interviews, and lectures. But was his best speech so far which captures the culmination of his most recent thinking. In short, Bitcoin is not just digital money, nor even digital property, but digital capital. He makes the case why this capital will attract all other forms of capital, and why there is no better alternative.

The rest of day two was the ground game of corporate Bitcoin adoption. The CEO, CFO, and treasurer of MicroStrategy all told their stories, along with external lawyers, bankers, and ETF managers. The big message here was that a corporate treasury has traditionally not taken a very safe approach to its assets, as investing in bonds or even stocks can be risky when factoring in inflation.

One of the more interesting off-line discussions at the conference centered around the ETF inflows. In the long-term, there likely will be concentration in the market, with just a few of the ETFs commanding most of the market share, like Fidelity, BlackRock, and GBTC. And the next wave of capital will come from wealth managers, which have not yet invested in Bitcoin because of its volatility. Wealth managers are working out these details now with the ETF providers on how to handle scenarios if Bitcoin’s price drops suddenly in the short term. I expect these to be solvable problems, and believe that there will be a large influx of new buyers of Bitcoin from wealth managers this year, possibly by the fall.

The regulatory panel gave an update on the legal and accounting standards around Bitcoin. The Bitcoin ETF approval emerged because the SEC already approved the futures Bitcoin ETF in the past, so the agency was essentially painted into a corner and had no legal grounding not to approve the spot Bitcoin ETF. Looking ahead, the big issue is the approval or denial of the Ethereum ETF, which the panelists from the SEC said was unlikely. The main problem is that it would create havoc in the market. Approving the Ethereum ETF would open a can of worms since Ethereum is classified as a security (versus Bitcoin as a commodity). This is evident from Ethereum’s recent change from proof of work to proof of stake, a change that could only occur through a central organization (the Ethereum Foundation) that has the power over the protocol in a way that no one in Bitcoin does.

Finally, the fair value accounting for Bitcoin is a big improvement. Before, the accounting was similar to other intangible assets, which would be impaired (written down but not written up). So, the value of the Bitcoin was always conservative, underestimating its market value. Under Fair Value accounting, this goes away.

Saylor’s Strategy