For many equity investors, Michael Saylor may not be a household name. But for crypto investors, Michael Saylor is legendary for his bullish stance on Bitcoin (BTC -2.24%), as well as for some of his more outlandish takes on social media about the future of crypto. His company, MicroStrategy (MSTR 3.38%), is now the largest corporate holder of Bitcoin in the world, and it's not even close. After buying an additional $615 million worth of Bitcoin at the end of 2023, his company now owns close to 1% of all Bitcoin in the world.
Even more remarkably, MicroStrategy only started buying Bitcoin back in 2020, more than a decade after Bitcoin originally launched. But in the past three-plus years, Saylor and his company have consistently added to their Bitcoin position, through a variety of different market conditions. So what's behind this push to buy as much Bitcoin as they possibly can?
Bitcoin as a long-term store of value
As Saylor has reiterated over and over again, Bitcoin is the single best store of value over the long haul -- even better than gold. In fact, Saylor has even opined that the market cap of Bitcoin (now just under $1 trillion) could one day approach the market cap of physical gold, which is estimated to be around $13 trillion.
There are several reasons for this admittedly audacious point of view. One is that Bitcoin has a limited lifetime supply. According to the algorithm powering Bitcoin, the total lifetime supply of Bitcoin is capped at just 21 million coins. The current circulating supply is close to 19.5 million coins, so we are getting close to the point where all the Bitcoin that will ever be created has already been created.
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As Bitcoin adoption surges on a global scale, it will increase its relative scarcity. More people will be vying to gain access to a very limited supply, and over time, that is going to boost the price of Bitcoin. It's just basic economics. With supply largely unchanged, and demand going through the roof, the price of Bitcoin should soar.
Moreover, the limited supply of Bitcoin makes it attractive for another reason: It is arguably the single-best hedge against inflation over the long term. While gold investors may find this point highly debatable, the underlying logic does make a certain amount of sense, especially when you compare Bitcoin to fiat currency (i.e., currency controlled by governments and central banks, such as the U.S. dollar).
This is due to the fact that an algorithm carefully controls the rate at which new Bitcoin is created. In fact, every four years, Bitcoin actually becomes more deflationary when the rate of new Bitcoin creation is cut in half (i.e., "the halving"). In contrast, a central bank can (theoretically) print as much money as it wants, which is what can lead to inflation and even hyperinflation.
Takeaway lessons for the average investor
Putting this all together, I think there are several lessons for the average investor. Perhaps the most important lesson is the need for a long-term outlook. As Saylor has pointed out over and over again, his Bitcoin strategy is not a short-term trading strategy. This is all about buying Bitcoin for the long haul, and letting the market do its magic.
Another key lesson is the need to stick to a buy-and-hold strategy, through a variety of different market conditions. Yes, MicroStrategy started accumulating Bitcoin during the last bull market rally, at a time when Bitcoin was skyrocketing to an all-time high of $69,000. But the company was not afraid to add to its position during the crypto market downturn, and Saylor now looks like a market savant, with Bitcoin poised for its next major market rally.
Finally, it's never too late to invest in an asset if you truly believe in its long-term potential for price appreciation. Saylor and MicroStrategy regularly update the public on just how much Bitcoin they own, as well as the average purchase cost of each Bitcoin. Remarkably, the average cost of a single Bitcoin for Saylor at the end of November was $30,252. In essence, that means he completely missed out on the period of time (an entire decade!) in which Bitcoin surged from $1 to $30,000. So, no, it's not too late to invest in Bitcoin.
Bitcoin for the long haul
It's easy to understand why Saylor is so unabashedly bullish on Bitcoin. But before you rush out and buy Bitcoin, make sure you fully understand the reason why Saylor is buying Bitcoin hand over fist. It's not just because Bitcoin is soaring in price -- it's because Bitcoin has certain inherent properties that make it valuable over the long haul.
Despite the risk and volatility of crypto, the long-term outlook certainly seems bullish for Bitcoin. When Saylor recently appeared on CNBC, he suggested that Bitcoin had the potential to increase in value by 10x. At its current price of $44,000, a 10x valuation multiple means that a single Bitcoin could theoretically one day be worth close to half a million dollars. Own just two Bitcoins, and you could one day become a millionaire.
