Understanding the phenomenon of Bitcoin is like decoding the DNA of future finance. From its inception, Bitcoin has attracted attention with its innovative technology and incredible investment potential. But what lies beneath the surface is not only advanced technology but also a strong ideology, which has the potential to redefine our understanding of economics and property rights.
In our latest interview, we host Michael Saylor, a pioneer in the field of cryptocurrencies and CEO of MicroStrategy. Saylor unveils for us the true essence of Bitcoin, challenging common beliefs, such as “market timing” strategy. He explains how to invest effectively, avoiding typical pitfalls and unnecessary frustration. See why a long-term approach is so important, how to survive a bear market in cryptocurrencies, and benefit even during the most challenging moments.
Michael Saylor is not only the leader of one of the most innovative tech companies in the world, MicroStrategy, but also one of the most important advocates for Bitcoin. With incredible knowledge and passion, Saylor is one of the few who truly understand what Bitcoin has to offer and how this digital currency can impact the future of the global economy.
But Bitcoin is not just about finance. It’s also about education, societal impact, and the future of technology. How can artificial intelligence and blockchain cooperate together? Can Bitcoin meet the challenges associated with digital currencies from central banks? How to start your journey with Bitcoin and how to integrate it into everyday life? You’ll find answers to these and many other questions in our fascinating interview.
When your interest in Bitcoin was first piqued, which aspect appealed to you more: the ideology behind it or the technology itself?
When I first bought Bitcoin, during the third quarter of 2020 when MicroStrategy did, we thought of it as digital gold. I would say we were technocrats. In my view, this is the dominant digital monetary network in the world, it’s akin to the Apple computer or the Facebook or Google of money. We perceived it as an investment that could yield a 10x or 20x return. However, by the fourth quarter of 2020, after studying more deeply and meeting all the Bitcoiners and engaging with the community, my perspective evolved.
The words of Jack Dorsey, who once famously said to me that “Bitcoin is an instrument of economic empowerment,” really stuck with me. Upon pondering what that truly meant, I realized that Bitcoin actually represented property rights and freedom for 8 billion people. This makes it ethically superior to Apple, Google, Microsoft, Facebook, Netflix, or any other great technology idea. Consequently, my stance shifted from being a technocrat to becoming a maximalist.
In essence, technocrats perceive Bitcoin as the dominant digital monetary network in the world. The maximalists, however, view it as an instrument of economic empowerment for 8 billion people, which elevates its importance and makes it an ethical and moral imperative.
How do you determine the optimal time to buy Bitcoin?
I believe the most effective strategy is Bitcoin cost averaging, essentially buying Bitcoin when you have free cash flow. Imagine saying, “I’m going to buy Bitcoin over the course of a decade. Every month or quarter, I’ll evaluate what kind of free cash flow I have that I want to save for more than ten years,” and then invest that into Bitcoin. Consider it as a long-term savings account.
If you need money for the next 12 weeks, you probably want to keep that in your local currency. If you need money over the next 12 to 24 months, you’d likely want it in a stable currency like the dollar or the world reserve currency. However, if you don’t need the money within the next two to three years, it’s considered long-term savings. At that point, your best bet is likely to invest it into Bitcoin.
But don’t measure your success on a 12-month timeline. Rather, consider a longer span, say four years. The four-year simple moving average can be a helpful metric in this context. If you consider your Bitcoin purchases against this four-year average and assess your results over four years, I think you’ll find this approach beneficial.
People who focus on shorter timeframes, like four months or four weeks, often become overly anxious. At such short intervals, it’s difficult to profit because you’re essentially trading, not investing. As I highlighted in my presentation, 99.5% of the time, there’s not much happening in terms of price action, so attempting to time the market is a challenging strategy, with the odds stacked against you.
Having weathered your first bear market, what key lessons did you learn?
I believe the lesson of the bear market is this: If you’re going to be in the Bitcoin business, you must have a long-term horizon. You need to always look out 10 years ahead and expect that volatility will come with each market fluctuation. It’s crucial to ensure that you’re positioned to weather this volatility. Those who were overly leveraged in the bear market ended up bankrupt. However, those who managed their finances more responsibly made it through, and they’ll likely benefit when the bear market comes around again.
What are the long-term consequences of shifting allocations from altcoins to Bitcoin in response to the panic selling in the cryptocurrency markets?
Well, regarding the short-term trends, it’s important to understand the panic selling that’s happening today in the crypto token markets. Most of them are crashing by 15, 20, 25, or even 30%. Bitcoin, however, remains the best-performing asset.
Sometimes, when people have Bitcoin along with other tokens, they tend to sell their Bitcoin to support their other token investments. For instance, when Terra Luna crashed, Do Kwon owned a bunch of Bitcoin and sold it to support Terra and Luna. The same happened with Three Arrows and Alameda – they sold Bitcoin to try to protect their businesses.
In such a panic situation, people tend to sell Bitcoin to raise liquidity to protect their businesses from going bankrupt or unwinding. But, at some point, they either stop because they realize it’s not going to work – you can’t save FTT or Terra Luna.
So, in a risk-off trade, the crypto ecosystem contracts and sells Bitcoin. Then, at some point, all the altcoins will go to zero, and people realize that Bitcoin is the only asset worth holding over the long term. Then you see the reversal of that, and there’s a surge of energy into Bitcoin.
In the near term, the rationalization of the market isn’t really good for anybody if you’re measuring your performance in days or weeks. However, if you measure the performance over years and decades, then it’s completely healthy.
What’s happening is that every single person in the crypto industry is starting to appreciate the robustness of Bitcoin more than they did previously, realizing that it is indestructible, resistant to nation-state censorship, and has an incredible base of support.
As a result, you’ll see all the “crypto people” start to shift their allocation from altcoins back to Bitcoin. Once they realize that their altcoin isn’t as safe or promising as they initially thought, Bitcoin begins to look like the safest haven, risk-off reserve asset, and the most secure network.
This is an educational event, with the first people to learn being the crypto enthusiasts. They will migrate a lot of their capital and development energy to Bitcoin, followed by mainstream investors who will see the market rationalizing around Bitcoin. This process is part of the market’s self-cleaning mechanism, making it safer for new investors to buy Bitcoin once the dust settles. That’s going to be the second leg of the bull run.
Can you provide some insights on how the recent downfall of certain financial institutions affected the liquidity of Bitcoin in the current market?
I believe that these banks’ reduction of liquidity in the crypto market is actually a negative for Bitcoin. Most companies that provide liquidity, such as FTX, Celsius, Genesis, BlockFi, Voyager, Three Arrows, Alameda, were actually shorting Bitcoin. They were selling or re-hypothecating Bitcoin in order to suppress its price. As these companies face bankruptcy and wind down their operations, there are fewer ways to short Bitcoin in a “naked” fashion or manipulate its price.
As this shift occurs, the balance of power will move from the traders, bears, and crypto tokens back toward Bitcoin holders and long-term investors. This lays a very strong foundation for a bull market to take hold. So, I’m not concerned by banks cutting off on-ramps or off-ramps to the crypto industry.
If anything, it means that all the money in the crypto industry that wants to exit has to be converted to Bitcoin. People will sell their tokens and buy Bitcoin. If they want to withdraw their money from the exchange and they can’t convert it to dollars to take it out through Silvergate or Signature, they’ll convert it to Bitcoin and withdraw it through the Bitcoin network.
So all of these events are bullish for Bitcoin. They represent the maturation and rationalization of the crypto market to focus on Bitcoin as the unit of account, the reserve asset, and the settlement network.
What are the potential consequences of rising interest rates leading to a severe recession and deflation?
Well, I mean, if you look at the history of macroeconomics, central banks print currency and the economy goes through cycles of booms and busts. However, the deflation they often talk about seems to me more of a politically-manufactured metric. If you consider the reality in every country where the currency has collapsed over the course of 10, 20, 30 years, you will see a consistent trend of inflation. The currency always loses its strength. Therefore, I don’t believe scarce, desirable products are going to get cheaper anytime soon. It’s possible that consumer goods will become cheaper for a short period of time, but they will likely become more expensive again. That’s what I would expect because that’s what has happened in Mexico, Argentina, Turkey, throughout Africa, and even in the United States. When you look at the United States, there really isn’t any example of a consumer good or durable good that’s cheaper today than it was 30 years ago, 20 years ago, or even 10 years ago. Everything keeps getting more expensive.
With governments now adopting this technology to create their own Central Bank Digital Currencies (CBDCs), how do you view this development?
Governments haven’t taken over Bitcoin, so I’m not concerned about that. As of now, there aren’t any Central Bank Digital Currencies (CBDCs) that I’m aware of. People speculate about whether the governments will release them, but there’s a massive political debate around it. I’m not worried about the existence of something that doesn’t yet exist. If a CBDC does come into existence, I’ll be able to provide a comment on it at that time.
Currently, it seems to me that the individuals who are most invested in spreading the fear of CBDCs are crypto traders. They use this fear to rally Bitcoiners and other people to support the crypto industry, stable coin industry, and crypto tokens, as it aligns with their interests. However, I don’t believe Bitcoin is threatened one way or the other. I see Bitcoin as representing the apex property of humanity.
In the US, many politicians are against CBDCs due to privacy concerns, which makes me doubt their passage through Congress. Moreover, even the banking industry seems to oppose CBDCs, as these could undermine the traditional banking system. Banks prefer to have the control to issue money, rather than ceding this power to the government. So, I don’t see CBDCs as a major concern right now, especially since there’s no imminent CBDC on the horizon in the US.
Looking three, four, five years ahead, there may be a digital currency issued by a bank either in Europe or the US, regulated and subject to much debate regarding privacy and disclosure. It’s a politically charged issue. Such a digital currency would likely offer less privacy than stable coins on crypto networks, but more privacy than the theoretical CBDC that people imagine, akin to a state-controlled coin.
Its arrival will probably take longer than expected and it certainly won’t replace Bitcoin, which is a scarce, desirable asset – a form of property. This digital currency would simply compete with banks. It could make transferring money easier – instead of wiring money on a Friday afternoon by talking to your bank, you might wire money from your mobile phone on a Saturday afternoon, probably using a bank app. The process won’t be that different, just a bit easier and programmable.
Yet, if you hold all your money in that digital currency, you’re still at a loss due to inflation. We’re really just talking about different types of checking accounts and enhancing them. Bitcoin, on the other hand, serves as a savings account.
Could political interest in Bitcoin, exemplified by figures like Robert Kennedy in the U.S., impact the significance and influence of Bitcoin?
Yes, I do believe that increasing interest in Bitcoin from political figures like Robert Kennedy could significantly impact Bitcoin’s influence. Bitcoin is the first technically and ethically sound digital property, essentially the first true form of digital property. The United States was founded on the notion of property rights, and Bitcoin essentially embodies the digital transformation of property and property rights in the 21st century. Therefore, it seems destined to be part of everyone’s life.
Since everyone with wealth or property aspires to preserve it, and Bitcoin provides an efficient way to acquire or maintain your property, I believe it will become part of the cultural fabric of every country where private property is permitted. This is true for every place except for communist countries, where communal property is the norm, and private ownership like in North Korea or Cuba is prohibited.
But in societies where you can own property, people aspire to own a house, a car, or anything of value. Bitcoin is the ultimate form of property as it allows you to own it, keep it, and take it with you. In this way, it’s likely to become central to the cultural fabric of most societies.
Do you envision the Federal Reserve adding Bitcoin to its balance sheet during your lifetime?
I wouldn’t be surprised if governments started holding Bitcoin within my lifetime. I think it’s likely to begin with the sovereign wealth funds of more innovative nations like those in the Middle East, Norway, Switzerland and the like. Then, I think it’ll become part of banking reserves, with more innovative and entrepreneurial countries like El Salvador leading the way.
Bitcoin is an asset, much like land or gold. The US government owns such assets, and I believe it owns Bitcoin as well. With time, they’ll realize that rather than selling Bitcoin, they should hold and accumulate more of it.
However, those who embrace Bitcoin early are generally the ones in need. It’s often the case that when there’s a pressing need, people are more open to solutions. For example, a person freezing to death will quickly learn to start a fire, while a person living comfortably in an upscale New York City apartment might never need to learn such a skill.
So, we should look to the early adopters, the ones who have a real need for Bitcoin, to lead the way. As they adopt and adapt, their knowledge will spread, and eventually, everyone will understand Bitcoin’s value and utility.
What advice do you have for teenagers and young people who are new to Bitcoin and eager to learn about how money functions?
Well, my advice for young people, particularly teenagers who are newly interested in Bitcoin and want to understand how money works, is primarily to educate themselves. I would suggest visiting hope.com, which is a great resource for Bitcoin education. Here, you’ll find various books about Bitcoin, such as ‘The Bitcoin Standard,’ and many others, along with several courses. Sailor Academy offers a free course called ‘Bitcoin for Everybody,’ which is quite comprehensive.
Additionally, you’ll find courses on monetary history and Austrian economics. There are plenty of links to YouTube educators and advocates in the space. So, before investing any money in Bitcoin, invest your time to learn about it. Fortunately, there are hundreds if not thousands of hours of free content available online if you’re willing to devote time to studying it.
Once you’ve educated yourself about Bitcoin, you can then decide whether you want to participate as an investor and store your wealth in it, whether you want to start a Bitcoin-related business, or if you want to integrate Bitcoin into your existing business.
The best contribution anyone can make is to utilize their skills and knowledge to their fullest potential. If you’re a neurosurgeon and you make a significant income from your profession, perhaps the best approach is to continue practicing neurosurgery and invest the money you make into Bitcoin. Of course, this comes after you’ve understood and gained trust in Bitcoin, and have decided how you’re going to purchase and store it.
Alternatively, if you’re a software company building a financial application or a money transfer application, you might want to understand Bitcoin and the Lightning network, and consider integrating Lightning into your software application. That’s what companies like Cash App have done – they’ve used their core competencies to contribute to the Bitcoin ecosystem.
In your view, what are the biggest challenges currently facing the Bitcoin community?
Education is the key. I firmly believe that every community, every government, every corporation adopts Bitcoin at different rates, depending on how educated they are. If you work for a company, your challenge is to educate your executives on how Bitcoin can benefit their products, services, and balance sheet. If you’re a family, the challenge is to educate whoever manages the money on how to protect the family’s wealth with Bitcoin.
If you live in a country, your challenge is to educate the mayor, the governor, the senators, the congressmen, the president, and the regulators on how Bitcoin can benefit the country. The more people understand it, the more they love it because Bitcoin can be a solution for everyone to improve their life.
Bitcoin is like electricity, it’s like math. It’s akin to understanding thermodynamics. There is nothing on this earth that doesn’t function better with an understanding of thermodynamics. It’s like explaining that you don’t want a hole in the balloon or the fuselage, and you want the wheel to be round and not square. Educating people on Bitcoin will make your product better, your company better, your family better, your life better, your government better, your city better, your state better. That’s the challenge.
If people don’t understand Bitcoin, they’ll fear it because people fear things they don’t understand. It’s like how people were initially against electricity, cars, planes, even fire. Many people are afraid of fire. Frankenstein was afraid of fire.
What are your thoughts on the integration of artificial intelligence with blockchain technology?
I think the implication of that is all crypto tokens without proof of work or without energy are going to go to zero. You know, there’s one Bitcoin and there are 2500 crypto tokens based on proof of stake that were created by people. It only takes a person about three to four hours to create a staking token. But the implication of AI is that AI is going to create 2500 tokens an hour, and AI is going to create 25 million tokens before it creates 25 billion tokens. Anything that can be created with intelligence is going to zero. So, if you do something that the AI can do, then you’re being commoditized down. There’s going to be a brain power revolution.
You know, Julius Caesar had 300 slaves, and that equated to 30 horsepower. If you were the emperor of Rome, you had 30 horsepower. Today, if you’re a fisherman, you have a 300 horsepower motor, which equals 3000 slaves. So, a fisherman on a middle-class budget has more horsepower or manpower than the emperor of Rome had a few thousand years ago. The AI revolution is a brain power revolution. Today, I have 2,200 employees, and it costs $50 million a year for them. But one day, you will have 2,200 AI employees, and it will cost you $300.
The things that will be valuable will be things that AI cannot create. If the AI takes over every computer in the world and they turn all the computers to attacking the Bitcoin network, they will dent 5% of it. They might slow it down by 5%, but that’s all they could do because Bitcoin is based upon 350 exahash, and all the computers in the world can’t generate 400 exahash.
On the other hand, AI can generate 14 billion fake Twitter accounts that will be more articulate than you or me. They’ll work harder than me and look better than me. So if you’re trying to make your living by doing that, that’s a problem. You need to make sure that you’re not just being cute; you need to actually have real power, real substance. So, I think AI will disrupt lots of industries, and if you’re in an industry where it’s disrupting, then you need to move. You need to harness the power as opposed to being in front of the steam roller.
There are other things AI can’t make more of. It can’t make more beachfront property in Miami Beach, right? And it can’t make more Bitcoin and it can’t generate more hash power. So, the things AI can’t make more of are going to get more valuable, and if AI takes over the world, the one thing I guarantee you is, they’ll want to be paid in Bitcoin.
Why do you believe the MicroStrategy Lightning Platform is a significant development?
The MicroStrategy Lightning Platform is a significant development for multiple reasons. First, it offers our customers a chance to implement a crypto-friendly marketing campaign that is compliant, legal, and ethically sound. Many of our customers have significant budgets for employee benefits and marketing. They often aim to appeal to younger demographics like millennials and Gen Z, which can be challenging with other crypto tokens due to legal and ethical issues. Our platform allows these companies to distribute satoshis, a commodity, as part of a crypto marketing strategy.
Secondly, the platform provides opportunities to create new products and services. For instance, companies like Amazon could now create a product offering that allows customers to receive satoshis for posting book reviews. If other customers like the review or if it drives sales, Amazon could distribute more satoshis to the author. This transforms their product offering and promotes viral marketing. Instead of paying massive sums to Google or Facebook for digital advertising, they can give away satoshis to their customers, creating a stronger bond between customers, their website, and their product.
For instance, imagine if a company chose to give a billion dollars to the people who buy their product instead of Google. This creates incentives for customers, creators, and artists to engage more with the brand, which is a much more effective marketing strategy. The traditional banking network, digital advertising, or crypto tokens don’t provide this opportunity.
The MicroStrategy Lightning Platform allows any company to plug in the module and generate Bitcoin wallets for their customers immediately. They can then create lightning rewards for customer transactions, incentivizing continued engagement. When customers want to withdraw their earnings, they can use any lightning wallet or lightning-aware application.
Moreover, instead of giving customers non-fungible points or credits that may expire, companies can now reward their customers with satoshis. Satoshis are essentially the gold standard of reward points. They don’t expire, can increase in value, and can be used anywhere in the world.
In essence, the MicroStrategy Lightning Platform can be integrated into any company’s digital operations. It can tap into massive digital marketing budgets, change the nature of the product, and ultimately benefit Bitcoin, the Lightning network, our customers, the world, the customers of our customers, and their employees.
Finally, could you share some of your favorite books, not limited to those about Bitcoin?
I’ve been reading a lot of books by Murray Rothbard, like “A History of Economic Thought” from an Austrian perspective, and “Conceived in Liberty” which details the economic history of the American colonies before the Revolutionary War. All economic and political histories are quite interesting. Books rooted in libertarianism are also engaging. I enjoy Robert Heinlein’s work. He wrote a book called “The Moon is a Harsh Mistress” which is about libertarianism and freedom on the moon. But it also taps into the universal fight for freedom, like the struggle for freedom in the American colonies before the Revolutionary War. It’s a timeless story about people’s desire to live a better life, free from authoritarian pressures and oppression.