MicroStrategy, a business intelligence, mobile software, and cloud-based services provider, is planning to make an investment in bitcoin and other digital assets, as per the Q2 2020 Earnings Call of the company held on Jul 28, 2020.
“We will seek to invest up to another $250 million over the next 12 months in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as Bitcoin, or other asset types,” as part of its capital allocation strategy, said Phone Le, the President and Chief Financial Officer of the Nasdaq-listed billion-dollar software firm.
This move toward bitcoin and crypto-assets is in response to their decision to take a more “opportunistic approach” to its balance sheet and the depreciation in USD.
The company has a large amount of USD, about $500 million in excess cash & other cash equivalents, in their balance sheet that they have been carrying for a while. But the yield on the dollar has been decreasing — the 10-year treasury yield has been closing at record lows — which the company is expecting to further fall into negative territory.
“We’re expecting negative real returns or a negative real yields on U.S. dollars,” said Michael Saylor, Chairman, and Chief Executive Officer.
On top of the coming “low-interest-rate environment” all over the world for quite, Saylor told the company’s shareholders that they are expecting more monetary and fiscal stimulus from the US Federal Reserve.
As such, “if you have large dollar values and you’re hoping for any kind of return on them, that’s faded. Gold, silver, and bitcoin are showing strength,” he said.
Dollar already had its worst month in decades, and the index continues to weaken. The company executives reflected what the world has slowly coming to realize, and the crypto community has long been voicing — the loss of faith in the fiat currency.
Because “faith and fiat currency across the market is fading and we’ve seen that in rallies in most asset classes during Q2,” Saylor noted holding a large portion of USD is not “prudent.”
And as the dollar has been “weakening,” “gold, silver, bitcoin, and equities have all been accreting.”
As such, besides buyback to provide returns to the shareholders, the company plans to “invest another portion of our capital into assets other than dollars that will yield a positive real rate of return.”