Economist slams Michael Saylor’s MSTR-Bitcoin strategy as a ‘shell game’
American economist Peter Schiff is sustaining his critique of MicroStrategy (NASDAQ: MSTR) executive chairman Michael Saylor’s Bitcoin (BTC) accumulation spree as a ‘shell game,’ questioning its long-term viability.
This criticism comes as MSTR’s share price has experienced a bearish sentiment in the short term, dropping 8% in the past week despite Bitcoin trading at a new record high.
According to Schiff, MicroStrategy’s sale of shares to finance additional BTC purchases is a move that props up its value while contributing to the company’s stock drop, he stated in an X post on December 17.
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“Shares of $MSTR were down by 5.5% today even as the price of Bitcoin rose. This likely indicates that Saylor was in the market selling more shares of MSTR to buy Bitcoin, thus supporting its price. The $42 billion question is how much longer can this shell game continue,” he said.
The economist’s latest stance on Saylor emerged after the business intelligence company acquired an additional 15,350 BTC for $1.5 billion, bringing its total haul to 439,000 BTC.
The funding for this purchase came from share sales, part of an ongoing strategy to convert company equity into Bitcoin, which has been celebrated and scrutinized.
Bitcoin and real estate debate
Amid the criticism, Saylor drew an analogy between Bitcoin investment and buying Manhattan real estate, stating:
“I would have bought Manhattan 100 years ago, 200 years ago, every year for the past 300 years. You pay a little bit more than the person that bought Manhattan before you, but it’s always a good investment to invest in the economic capital of the free world.”
However, Schiff expressed the difference between leveraged real estate investments, which generate rental income, and Bitcoin, which does not produce any income to service debt. He has previously warned that Saylor is gambling with investors’ money.
“It’s wrong for Saylor to compare his leveraged buying of Bitcoin to investors borrowing money to purchase Manhattan real estate. Real estate generates rents, which can be used to service and repay debt. Bitcoin doesn’t generate any income to make interest or principal payments,” Schiff added.
In defense, Saylor pointed to the success of his firm’s strategy, highlighting that MSTR’s treasury operations have delivered a ‘BTC Yield’ of 72.4% year to date.
It’s worth noting that MicroStrategy’s Bitcoin purchases have also been funded through convertible notes and significant debt.
To this end, Schiff, a gold advocate, warned that the company’s cyclical strategy poses a risk: If Bitcoin’s value drops, MicroStrategy could struggle to cover its debts and may be forced to sell its Bitcoin to do so.
MicroStrategy supporters
In general, MicroStrategy’s investment plan has helped the stock become one of the best-performing in 2024, aiding the company’s entry into the lucrative Nasdaq-100 index.
Among the supporters of this plan is investor Robert Kiyosaki, who has called Saylor a ‘genius,’ noting that Bitcoin has helped create wealth for MicroStrategy and its investors.
While Schiff advocates for gold over Bitcoin, Kiyosaki, on the other hand, remains dismissive of this debate, noting that investors should consider both assets equally.
Overall, MicroStrategy’s recent Bitcoin purchases partly fueled the asset to hit a new all-time high of above $108,000. As of press time, the maiden cryptocurrency was trading at $104,180.
In conclusion, while MicroStrategy’s Bitcoin strategy has delivered strong returns, critics like Schiff potentially raise valid concerns. The strategy’s long-term sustainability remains uncertain, as it has yet to be tested over time and relies heavily on Bitcoin’s volatile value.
Featured image via Shutterstock
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