[snowwolf]

"As of December 21, 2020, the Company holds an aggregate of approximately 70,470 bitcoins, which were acquired at an aggregate purchase price of approximately $1.125 billion"

Current value January 4, 2021 - $2,238 billion

https://www.microstrategy.com/en/company/company-videos/micr...

[VHRanger]

Here's the cold take:

What explains this price doubling? Certainly it's not actual use of BTC as said in the article.

Similarly, if BTC was somehow underpriced all this time, why would it see such a rapid price correction upwards?

The gains can be explained by nothing else than mania and speculation.

[PKop]

>Certainly it's not actual use of BTC

You have to drop the idea that scarce/finite assets can, should or need to be used as "currency".

Currencies are necessarily able to be increased in supply easily.

Even though there are debates about the actual description of central banks expanding their balance sheets as literal "money printing", this is mostly a debate about where this liquidity flows. For the wealthy and corporations who can borrow at extremely low rates, of course this means they have access to this "printing" and will then inject this liquidity into assets.

>The gains can be explained by nothing else than mania and speculation.

Sure, sort of.

But finite assets are doing their job if they rise in price (in reference to fiat currency units of account) as fiat quantities increase, and the people who have access to this fiat look for a place to put it.

This is literally the use case of Bitcoin, and so it is absolutely "being used".

But since the expansion of BTC has no flexibility (strict supply schedule regardless of economic conditions or price), unlike gold mining or central bank open market operations, it makes BTC very volatile both on the way up and on the way down.

But long term (so far) it is doing its job (of absorbing expanding fiat liquidity and supply).

[notahacker]

> You have to drop the idea that scarce/finite assets can, should or need to be used as "currency".

Sure, but the whole premise that Bitcoin is an asset is that it has theoretical use as currency. There are plenty of other things which are limited in quantity and fungible which nobody is paying $30k for because nobody believes that they are future of money.

[chillacy]

From a podcast I listened to, Michael Saylor does not have "future of money" in his investment thesis at all. He doesn't see this as currency. Instead, he sees bitcoin as something more like gold, but much easier to move around (and across borders), easier to audit, easier to liquidate, etc.

That this is not what was in the original bitcoin whitepaper doesn't seem to have stopped him.

[kelchqvjpnfasjl]

Why does the supply need to increase? Bitcoin can be subdivided to 100,000,000 times. If the value of one satoshi gets too high to be a practicable then a change can be introduced to make smaller units possible. This is like a stock split.

[dleslie]

BTC has no intrinsic use as a commodity; its value is as much on faith as any fiat. Perhaps more so, since it lacks the force of a state to support it and defend its use as a currency.

Sure, some folks purchase narcotics and other folks send money to Venezuela with it, but the vast majority of BTC holdings are playing their part in a multi-level marketing scheme for tech nerds. Every schmo who pumps the price with their fractional purchases pads the value of the whales' holdings.

[aent]

>The gains can be explained by nothing else than mania and speculation

And almost 22 billion fake tether dollars injected into the space.

[pontus]

Could you expand on this? I've heard many times that tether is what underlies a lot of the infrastructure of bitcoin trading on exchanges and that the company responsible for backing them is particularly unclear about what's going on and likely engaging in fraud.

As someone who is an amateur looking in, could you help fill in the holes in this picture? Why do we need tether? Why does it matter if tether is not backed 1:1 by USD? If the fraud really is so obvious and impactful, why 1) isn't BTC tanking and 2) why aren't there charges filed against the company?

[aent]

>why aren't there charges filed against the company?

There are, it's currently under investigation, lookup tether/bitfinex new york court case.

Tether is needed as many exchanges cannot trade in USD so need a crypto-substitute in a form of a 1:1 dollar equivalent stable coin.

Not being backed matters because it means a single company can essentially print infinite money and buy up crypto, leading to fast price increases, just like the one we are seeing right now. When you see $30000 price tag on a bitcoin you don't know what percentage of it is actually fake USDT dollars. Right now it doesn't mater as you can exchange usdt for usd 1:1, but one day the music will stop and a "bank run" will happen, which will expose a giant hole and a real price of btc, collapsing the whole scheme.

>why 1) isn't BTC tanking

My current theory is that they co-opted a lot of exchanges, if you read their website https://tether.to/ they admit that they are not backed by USD and mention "loans made by Tether to third parties" which sounds like they give exchanges billions of dollars for IOUs. So exchanges get free billion dollar loans and in turn tether can print more billions and trade it for real money on bitfinex which they own.

[CapmCrackaWaka]

The Gist is that Tether is a cryptocurrency that is supposed to trade at 1:1 USDT:USD. Every tether (their currency denomination) issued is theoretically backed by 1 USD. In 2017, Bitcoin prices soared in large part to the fact that so many people were trading tether for Bitcoin. It turns out that Tether may have arbitrarily issued more USDT than USD they have on hand. Therefore, the buys of bitcoin were essentially fake - trading $0.75 USD worth of tether for $1 of Bitcoin (a Tether lawyer said that Tether only had 75% of the cash necessary to back their supply of USDT).

I'm not sure how it's supposed to affect current prices, however. Tethers are still around, and as far as I know, they have not submitted to an audit, but 1 USDT is still trading for 1 USD.

[microtherion]

> Tethers are still around, and as far as I know, they have not submitted to an audit

They promised to produce documentation that should shed significant light on the situation by January 15 of this year [0]. In recent days, they have issued up to $800M tokens a day [1].

Which either means that everything is going just swimmingly, or that somebody is stuffing a few more suitcases with cash while heading for the airport. We may soon find out.

[0] https://cointelegraph.com/news/ny-attorney-general-expects-d... [1] https://twitter.com/usdcoinprinter/status/134612804290579251...

[Triv888]

> Why do we need tether?

You only get taxed on gains when you transfer coins to "real" currencies like USD... so you can use Tethers instead and buy Bitcoins back after a drop

[jaredtn]

Not true. Converting from BTC to ETH is a taxable event, for example.

[Triv888]

So if I trade fifty $100 cars for a $5,000 car, my income need to be taxed also? How does that work?

What if I transfer from a Bitcoin wallet to another Bitcoin wallet?

[intotheabyss]

Tether will be replaced by other stablecoins, so this isn't nearly as big a deal as many people will claim.

[hanniabu]

Supply shock. Take a minute and read about S2F:

https://link.medium.com/IeD1uR5y5ab

[janoside]

My guess is you have no idea of the underlying dynamics because you haven't done your research before deciding for yourself and stating confidently "can be explained by nothing else than..."

Here are a couple of threads describing the dynamics in play. Feel free to agree or disagree after reading but, contrary to your statement above, these can explain the price increase:

https://twitter.com/Croesus_BTC/status/1319734166557081600 https://twitter.com/real_vijay/status/1143070383261638656

Here's Lyn Alden, regarded by many to be one of the best macroeconomic thinkers working today (who is now very bullish on BTC), playfully echoing the same idea from above:

https://twitter.com/LynAldenContact/status/13458545139457065...

And, just in case the tone of Lyn Alden's tweet confuses you about the caliber of thinker you're encountering here, this is a recent article of hers with relevance to BTC macroeconomically:

https://www.lynalden.com/fraying-petrodollar-system/

And another covering several BTC misconceptions:

https://www.lynalden.com/misconceptions-about-bitcoin/

As I started: I believe you have not done your research to understand what you're looking at. This would be an excusable situation 5 years ago, but the BTC space is now teeming with high quality, pre-digested material that you can use to build a foundation of knowledge and understanding.

I believe you'll regret your hubris...sooner rather than later.

[chillacy]

> regarded by many to be one of the best macroeconomic thinkers

By whom? She doesn't seem to have a wikipedia page.

[lifty]

I follow a lot of macroeconomic and investment personas on Twitter and in the past 2 years Lyn Alden has been a rising star. But she is still young and fairly new so it will take a while before you see her more often on CNBC.

[deeeeplearning]

>The gains can be explained by nothing else than mania and speculation.

This was always the case for Bitcoin. Why would ever use it as a currency when its value can swing +/- 20% in a single day, that would be ridiculous.

[apta_]

The hypothesis is that its value will stabilize eventually. Many are using it as a store of value to resist government induced inflation.

[deeeeplearning]

Whose?

Bulls trot out the "Bitcoin to $1M" trope all the time, that hardly seems stabilized to me.

[davio]

https://www.chicagotribune.com/news/ct-xpm-2006-08-25-060825...

Reminds me of when Google was in danger of being a mutual fund for having too much cash

[renewiltord]

So weird to use two different decimal separators. Confused me for a second.

[Melting_Harps]

> Current value January 4, 2021 - $2,238 billion

Seriously... this out paced Microstraegy's core business now in just the last year's investment, and who knows how much Saylor put in of his own money without the need to disclose it. Personally, I think Saylor doesn't understand the tech very well and is more focused on selling the news to his investment Corpo class friends sitting on piles of cheap and depreciating fiat, which has it use but is waste of time as he should be using his gains to focus on development in the ecosystem in things like LN, Schnoor and other critical things like micro loan systems in Africa to really make full use of this tech.

Jack Dorsey, by contrast, has done most and all of those things and more, was actually on his way to Africa prior to COVID to embark on that.

'Badeconomics' should be what we call the advent of central bank based fiat currencies, as that has untold amounts of blood on its collective hands.

[SpicyLemonZest]

It reflects pretty badly on Microstrategy that a speculative investment of theirs outpaced their core business. Publicly traded software companies aren't hedge funds, they're not supposed to be making the kind of investments that can do that.

[1996]

> It reflects pretty badly on Microstrategy that a speculative investment of theirs outpaced their core business. Publicly traded software companies aren't hedge funds, they're not supposed to be making the kind of investments that can do that.

We have a different vision of what traded companies do.

For me, a traded company gives either a dividen, or shows a pattern of growth that is reflected in the share price - in either case, it will give me profits in the end, which is all I care about. I do not care about the "how" - that's the CEO and board job. I care about the profits. And so do you if you are not retired, because without profit, you won't be employed by this company for long.

A company that can adapt to a new trend, cut out bad lines of business, and give me more profit is a company I can consider for investment.

All that matters is the bottomline! Unfortunately many people here focus on useless things like technical debt or CICD pipelines, while they are just tools.

[Melting_Harps]

> in either case, it will give me profits in the end, which is all I care about. I do not care about the "how"

This is perhaps the most telling aspect of the investment class that explains how people so many are starving, being evicted and dying from COIVD in the World'd richest country while people keep pouring into Airbnb and Doordash IPOs.

It's so absurd to me how oblivious some people are about things that will lead to inevitable consequences to Society as a while while justifying any and all practices (not least of which slave labour) because their fake paper wealth number increases--all while the currency its denominated in loses more and more purchasing power.

[1996]

> many are starving, being evicted and dying from COIVD in the World'd richest country

Like every human being, you are entitled to an opinion - however, I fear you are turning that into an emotional argument, instead of logically looking at it. Your emotions are tainting your perceptions.

Most people on HN have a negative view of crypto because of sour grapes. That's fine if you can afford the missed opportunity caused by this kind of luddism.

> fake paper wealth number increases--all while the currency its denominated in loses more and more purchasing power.

Personally, the only "wealth" I believe in is the one that's in a FDIC insured bank, under your name.

As for the purchasing power, it doesn't really matter in isolation: as long as your wealth can increase more in nominal terms than the purchasing power can decrease, it means your wealth increase in real terms.

So what's the problem exactly?

Purchasing power, like everything else, is just one of the "tools" - like CICD or your favorite editor, it's a nice thing to talk about with your friends, but that's not the bottom line.

[xyzelement]

>> I do not care about the "how" - that's the CEO and board job. I care about the profits.

One element is diversification. Consider a hypothetical investor that holds 50% bitcoin 50% stocks may think he's somewhat diversified, but if underneath, his stocks just hold bitcoin on their books, then he's just 100% bitcoin and completely undiversified.

[renewiltord]

It happens all the time. Maybe the most famous is the Porsche/VW saga.

It doesn't reflect badly or any weird moral thing like that. It's just business.

[OJFord]

It's also a risk, since, at least in the UK, after you cross a certain threshold (off the top of my head, obviously not advice, I think it's actually 20% rather than the perhaps more intuitive 50%) it's considered to be your core activity, i.e. you become an investment company that for whatever reason dabbles in <whatever you consider to be your core business> which of course comes with tax implications (or it would be an easy way to avoid tax on your personal investments) and potentially an unwanted regulatory burden.

[jiveturkey]

not an expert (in anything else either), but in the US, bitcoin is not a financial instrument. they might as well be buying tulips or beanie babies (no slam intended), as far as the authorities are concerned.

[OJFord]

Ah true, and certainly that varies in different jurisdictions, I was just responding in general to the 'what are they doing investing when they're a software engineering company' point I suppose.

[Melting_Harps]

> 'what are they doing investing when they're a software engineering company'

Did it ever occur to you they may be accumulating a token that is required to operate on the most secure network devised by Man? And are you so immersed in your own narrative (echo chamber) that the potential value of building systems with this infrastructure at it's core never entered your mind? (Someone on a tech related community tried to relate it to Beanie Babies should say it all, FFS.)

Especially with the endless amounts of leaked information that is seen on a daily basis coupled with a situation where Nation-states (and Corps like Ticketmaster and likely larger ones with valuations that rival many country's GDP) are engaging in ever more Cyber warfare than conventional kinetic warfare, just for context: the International arm's trading racket is ~$100 billion/year Industry. Not to mention the ever expanding amount of Surveillance Capitalism tools that will eventually make it into the hands the blackhats and Cyber Military groups.

I highly doubt Saylor is doing that myself, he seems too short sighted on the media to think otherwise but it may be a facade; large institutional players are now coming with a bunch of inflated fiat holdings wanting to get in and are exploring so many more business models that it won't be long before this happens in my view. IBM certainly tried, failed and lost a lot of its potential because it tried to make its own blockchain while disparaging Bitcoin only to see Ripple (a token it focused on for its Hyperledger ecosystem) get sued by the SEC for selling unsecured securities and BTC sits at greater ATHs.

> Most people on HN have a negative view of crypto because of sour grapes. That's fine if you can afford the missed opportunity caused by this kind of luddism.

I get the sourgrapes, we all went through same regretful delays in buying in when we first heard of it as no one 'get's it' right away; but you make it seem like you can't just onboard right now and what irks me the most is the realization that it's the indignation of not having the astronomical gains from being early adopters that prevents you from doing so. It's fine to accept that mistake, we won't judge you (too much) as we've all been there to some degree and will be entirely if you just admit that mistake when you join in and try to do more than just make it a part of your portfolio and hopefully apply your skill set to earning BTC for your services rather than simply buying it.

That's when it all really sinks in and is the best watershed moment that I know of that makes everything click.