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‘There’s one perfect thing’ in the crypto market, Microstrategy CEO says

Microstrategy CEO Michael Saylor joins Yahoo Finance Live to discuss bitcoin, the crypto market, and the stablecoin crash.

Video transcript

MICHAEL SAYLOR: Crypto markets hoping for a reprieve following weeks of downward pressure and, of course, last week's implosion of the stablecoin Terra. They're not really getting that reprieve today, at least not on a broad scale. For a longer term look at crypto, though, let's bring in Michael Saylor, MicroStrategy CEO who, of course, has been a long time proponent of the cryptocurrency, holds it on the company's balance sheet, et cetera.

Michael, it's good to see you. So let's talk about the recent action. And I'm also, of course-- it caught my attention, the comments from FTX's Sam Bankman-Friend in the FT over the weekend where he talked about that Bitcoin is not really going to be a viable transaction mechanism, even if it can still be a good store of value. Does it need to be a good transaction currency in order to reach some of the heights that folks such as yourself have talked about?

MICHAEL SAYLOR: I think Sam laughed off mention of the Lightning Network. It's pretty clear that Bitcoin's the future of money and Lightning is the future of payments. And if you're going to do payments and transactions high speed, you're going to need a base layer that's ethically sound, economically sound, and technically sound. And that's what Bitcoin is.

But then billions and billions of transactions are going to go on a layer 2 like Lightning, which is an open permissionless ethical protocol, or they're going to move on layer 3s like Cash App or PayPal or Apple Pay or Visa or Mastercard. Those are securities. They're companies that are custodians that are moving payments back and forth. So I don't know why Sam left that off. But it's pretty obvious to every Bitcoiner that payments are going to take place on layer 2 and layer 3s.

- And so for the holdings, though, at this point that you've been able to amass over the years, one huge thing that sticks out is in terms of the crypto winter that we're in right now versus the one prior is the number of larger companies that have holdings such as yours. Is there a certain price target at which you would have to start liquidating some of those holdings?

MICHAEL SAYLOR: No. We're in it for the long term. Our strategy is to buy Bitcoin and hold the Bitcoin. So there's no price target. I mean, I expect we'll be buying Bitcoin at the local top forever. And I expect Bitcoin is going to go into the millions. So we're very patient. We think it's the future of money.

- So you don't sound like you have wavered whatsoever, Michael, as we have seen this downturn in price. Of course, we've seen downturns in price before. Is this one different at all? Is there any doubt in your mind when you watch the action that we've seen over the past few weeks?

MICHAEL SAYLOR: I think that the entire crypto crash has made a couple of things clear. First of all, there's one perfect thing. That's Bitcoin. That's a decentralized, ethically sound, technically sound, economically sound money. There's a bunch of imperfect things. There are the stablecoin, the USD, Circle, and Tethers, and BUSD, and et cetera. Everybody wants a stable US dollar. They're struggling with how to do it in a compliant fashion with transparency.

Then there's a lot of dangerous things. There's 19,000 dangerous things. That's basically all the unregistered security crypto networks running on proof of stake that have active project management teams that have ICOs that have some centralization in them. And Luna and UST was an example of one of those crypto security tokens that was mismanaged. And it blew up. And what's going to happen is an entire generation of crypto people are going to get educated on why Bitcoin is the superior asset.

And then a bunch of regulators are going to accelerate their regulation of stablecoins and accelerate their regulation of the crypto security tokens. And the winner of that entire exercise is Bitcoin because once people figure out why Bitcoin is superior to everything else, then the institutions are going to come in with large sums of money, and we're not going to have to struggle through this massive explaining why we're different than 19,000 other crypto tokens.

- And just quickly, Michael, just to be clear here, you traditionally have been sort of a Bitcoin maximalist, so to speak. So to be clear, you weren't invested in things like Terra or Luna. Are you in any of the stablecoins?

MICHAEL SAYLOR: Well, first of all, I'm not even sure-- Luna is not a stablecoin. But we wouldn't invest in an unregistered security. So 99.9% of everything in the crypto space is an unregistered security. And I might invest in a registered security one day. I mean, if you ask me would I buy Apple stock or Google stock after reading the 10-K and 10-Q disclosures, maybe, maybe not. But that's not our strategy.

But I really don't think that any public company or public investor can invest in an unregistered security. That's venture capitalists. So, no, we're not invested in it. It's pretty obvious that they're all unregistered securities. And I think the crypto industry hasn't really addressed that issue that's the elephant in the room. And the Luna-Terra meltdown has actually brought this to the forefront. And now I don't think people can ignore it.

- Michael, there's been some stories recently-- I think Fortune ran with this one-- if Bitcoin falls below $21,000, there might be some form of margin call over at your company. What does that mean? Help us understand, like, what does happen if crypto continues to fall?

MICHAEL SAYLOR: That's all FUD. Look, we started with $5 billion of unpledged collateral. We borrowed $200 million against it. So that's a loan to value of 4%. If Bitcoin fell 95% from that number, then we'd have to post additional collateral. People got their hands around the fact that we would adjust some collateral if Bitcoin ever got to $21,000. But it's really a non-issue whatsoever. You can think of it as like leverage of 1.04. If I was levered 10 to 1, we would have borrowed $50 billion against that collateral. But we borrowed $200 million. It's a nothing issue.

- What type of regulation do you expect to come over the course of this year, as we've increasingly heard Bitcoin and broader digital assets discussed accelerating in Washington. And how does that impact where you would add on to your existing crypto positions?

MICHAEL SAYLOR: OK. Well, first of all, we won't add on to crypto positions. We will add on to our Bitcoin position whenever we come into excess cash. And that's a very simple strategy. With regard to regulation, there's been a deadlock in DC and on Capitol Hill around stablecoin regulation and around security token regulation. I think the administration wanted to move faster. Congress was moving slower. I think that this meltdown of Luna, UST, that's going to accelerate the regulation of stablecoins and security tokens, which will be a good thing for the industry.

- And, Michael, finally getting back to price for just a second here, do you think that Bitcoin will remain sort of in the doldrums as long as the Fed is in a rate raising cycle?

MICHAEL SAYLOR: No, I mean, I think that clearly Bitcoin's been drawn down with all the risk assets and this deleveraging tightening cycle. But there are also the crypto crash issues and the Luna-Terra impact. So over time, I think as people get educated and as they get more comfortable, I think we'll recover from this drawdown. Fed policy is very difficult to opine on or to predict. And so clearly they have a huge impact on how people value all assets depending upon what they say from day to day.

- Michael, we certainly do appreciate the time here discussing not just your own holdings, but the broader landscape as well. MicroStrategy CEO, Michael Saylor. Thanks for the time.

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