Michael Saylor defended Strategy’s Bitcoin-backed credit score mannequin after critics argued that the corporate’s STRC dividend construction resembled a Ponzi scheme, saying the enterprise is constructed round monetizing Bitcoin capital features somewhat than counting on perpetual fairness issuance.
Talking in an interview shared through X on Could 9, Saylor addressed the market response to Strategy’s current earnings name, the place the corporate mentioned it was ready to promote Bitcoin, if wanted, to fund dividends on its STRC most well-liked instrument. The comment drew consideration as a result of Saylor has lengthy been related to the phrase “never sell your Bitcoin.”
In line with Saylor, the extra exact formulation is that Strategy doesn’t intend to be a “net seller” of Bitcoin.
“I’m very famous for saying, never sell your Bitcoin. And that’s why the internet went crazy when we said we might sell it,” Saylor mentioned. “But if I was being more precise, I’d say never be a net seller of Bitcoin. It just wouldn’t have been so viral or so catchy to say never be a net seller of Bitcoin.”
Why Strategy Is Not A Bitcoin Ponzi Scheme
The difficulty grew to become a degree of rivalry after Peter Schiff and different critics recommended that Strategy’s willingness to promote Bitcoin to assist STRC dividends uncovered weak point within the mannequin. Saylor rejected that framing, saying the corporate’s stability sheet shouldn’t be handled as if its Bitcoin holdings had been unusable or price zero.
“If you had $65 billion worth of something and people wanted to value it at zero, it’s not very good,” he mentioned. “We don’t want the credit rating agencies to think the company has $0 of assets. We want the credit rating agencies to think we have $65 billion of assets.”
Saylor mentioned the core mannequin is easy: Strategy points credit score, makes use of the proceeds to purchase Bitcoin, and expects the asset’s long-term appreciation to exceed the price of the dividend. He in contrast the construction to an actual property improvement firm elevating capital by means of credit score, buying land, enhancing it, and later monetizing the appreciation by means of gross sales, hire, or refinancing.
“What we wanna do is we wanna reinforce the business model is we sell credit to make a capital investment in an asset, Bitcoin, digital capital,” Saylor mentioned. “The capital investment accretes over time faster than the dividend. We then monetize the capital gain and we pay the dividend.”
That distinction is central to Saylor’s response to Ponzi allegations. In his view, critics conflate promoting frequent fairness to fund dividends with the broader financial construction of the enterprise. He mentioned Strategy traditionally used MSTR fairness, which he described as a by-product of Bitcoin that usually trades at a premium to Bitcoin, to fund dividends. However the firm now needs the market to grasp it might additionally use appreciated Bitcoin instantly.
Saylor mentioned that doesn’t imply Strategy expects to shrink its Bitcoin place. He argued that even when the corporate offered Bitcoin for dividend funds, its credit score issuance would enable it to purchase considerably extra Bitcoin than it sells.
“If we sell Stretch, if we issue Stretch credit equal to 2.3% of our Bitcoin holdings, then that means we will be a net buyer of Bitcoin forever, even if we sell Bitcoin to pay the dividend,” he mentioned. “Another point is that if Bitcoin appreciates 2.3% a year, we can pay the dividends forever, right? And continue to grow value, right? And we can do it without selling any common equity.”
He added that Strategy offered $3.2 billion of STRC in April, whereas the month-to-month dividend requirement was roughly $80 million to $90 million. In that state of affairs, he mentioned, the corporate would successfully be “buying 30 Bitcoin and selling one Bitcoin,” leaving it a web accumulator.
The interview additionally instantly addressed Schiff’s criticism. Saylor mentioned Schiff’s objection begins with a rejection of BTC itself, making it unlikely that he would settle for a credit score instrument constructed on prime of it.
“Peter thinks Bitcoin’s a Ponzi scheme. Peter is not really a lover of anything in this space,” Saylor mentioned. “Bitcoin is digital capital and we’ve created a digital treasury company by selling equity and credit instruments to buy capital. I think that Bitcoin is going to continue because it represents economic wealth in tokenized form with full property rights for the world.”
Saylor described STRC as a type of “digital credit” designed to strip out some Bitcoin volatility whereas producing an outlined yield. He mentioned Strategy overcollateralizes the instrument, with “for every $5 of Bitcoin” the corporate promoting “$1 of credit.”
“If you don’t acknowledge Bitcoin as legitimate, you’ll never acknowledge any derivative on top of it as legitimate,” he mentioned. “But for those people that believe that Bitcoin is digital capital, as a store of economic wealth in tokenized form, then what we’re doing is very straightforward.”
At press time, BTC traded at $80,929.
Featured picture from YouTube, chart from TradingView.com
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