September 11, 2022
On this anniversary of the September 11th attack on America, it is fitting we give some attention and thought to the millions of Americans that have contributed to the on going effort to maintain our unique Republic though great challenges, both internal, as well as external.
On a completely unrelated note, Friday’s short covering rally in Bitcoin may have been fueled by the announcement by MicroStrategy (MSTR) that it plans to sell $500 Million of its stock, to fund more purchases of Bitcoin.
Readers of this weekly forum may remember that MSTR has already taken a multi million dollar loss on its previous “investment” in Bitcoin, and has used loans secured by its holdings in Bitcoin as collateral, to make additional purchases of Bitcoin.
MSTR is using Bitcoin, as its “Primary Treasury Reserve Asset” That is they are parking their spare cash not in highly liquid and stable U.S. Treasury paper, but in a highly volatile Bitcoin.
Several highly regarded investment pros have said that further weakness in the price of Bitcoin, below $20,000 per coin, could trigger a big margin call on Hedge Funds and Companies, like MSTR, that have loans secured by their Bitcoins holdings.
Will this mixing of the unregulated Bitcoin market with the regulated Stock Market, cause a 2008 type financial crisis?
If I were the Chief Risk Assessment Officer of a major bank these days, which I am not, I think over the coming weeks, I would pay attention to the words of Warren Buffett:
“You don’t know who is swimming naked until the tide goes out.”
Of course, there are other market pros who believe Bitcoin will survive this current financial winter, and will once again be a major asset class.
For thousands of years Gold has a history as a “Store of Value.” Whereas, Bitcoin, and the other cryptocurrencies have an experience history of less than 30 years. So be careful.
I want to once remind readers, that these columns are meant purely for educational purposes and are not intended for investment advice. Consult your investment professionals before making any investment decisons.