Key Insights
- •The US Spot Bitcoin ETF showed mixed signals, with BlackRock being the sole seller.
- •Peter Schiff again questioned MicroStrategy's business model, calling Michael Saylor a 'conman'.
- •MicroStrategy's Monday announcement of a new USD Reserve failed to lift market spirits.
In a series of critical posts on X, Chief Economist at Euro Pacific Asset Management Peter Schiff called MicroStrategy’s co-founder ‘the biggest conman on Wall Street’. Schiff emphasized that MicroStrategy’s stock was ‘broken’ and that the business was ‘unviable’.
Schiff’s comments came shortly after Saylor and MicroStrategy CEO Phong Le made a controversial announcement Monday morning. The duo unveiled that selling Bitcoin (BTC) was not out of the question anymore; they also unveiled a $1.44B reserve.
The US Spot Bitcoin ETF is increasingly considered a barometer for institutional sentiment in the crypto market. Yesterday’s flows showed mixed signals in the BTC Spot segment, with BlackRock being the sole seller. ETH Spot ETFs showed a strong sell-off.
Schiff Calls MicroStrategy’s Business Model “a Ponzi Scheme”
Peter Schiff is a well-known critic of the cryptocurrency market. In a recent X post, the Chief Economist for Euro Pacific Asset Management noted that MicroStrategy’s sale of 8-10% preferreds to issue ‘digital credit’.
He explained that unless MicroStrategy sold its BTC, and since MSTR had no income, it could only pay more dividends by selling more preferreds.
Saylor’s Monday announcement noted that the new $1.44 billion cash reserve was introduced with their ‘risk-averse’ investors in mind.
In the video presentation, Saylor noted that investors were concerned that MicroStrategy’s market net asset value (mNAV) would go below the 1X mark.
A major part of Bitcoin Treasury firm MicroStrategy’s latest announcement was the emphasis on the company’s objective to function as a ‘digital credit’ vehicle.
It showed that its stocks were capable of giving significantly bigger spreads than BTC-based credit. Noted that MicroStrategy’s core method of raising money as of now is the sale of BTC derivatives.
The new $1.44 billion reserve will make their dividend-paying capacity more robust and more creditworthy.
Saylor and Le pointed out that at current price levels and at extremely low annual appreciations, MicroStrategy would be able to pay dividends for several years without raising capital.
Schiff has consistently maintained that Bitcoin does not have intrinsic value like Gold and Silver. Schiff is the founder of Schiff Gold. He consistently comments on Gold and Silver’s significant price movements.
Bitcoin Price Dives as the World Waits to Watch MicroStrategy’s Strategy
MicroStrategy’s Monday announcement was not negative, technically. To be precise, it was alarming, mostly because the co-founder had been staunchly against the idea of ‘selling your Bitcoin’.
Le and Saylor did not say they were worried about MicroStrategy’s performance at present levels. They seemed warned when revealing sharp revisions to their end-of-the-year estimates for several metrics.
One of their key revised estimate for the end of the year was for the Bitcoin price. Le noted that earlier in the year, they expected the BTC price to reach $150,000.
However, revised estimates stood in the range of $85,000 to $100,000.
The biggest crypto by market cap remains over 20% below its all-time high of $126,000 (achieved in early October). At press time, BTC was trading at $87,377, up 1.4% intraday.
Their revisions showed that MicroStrategy would report operating losses under the $94,000 mark.
Ever since the October 10th flash crash, the Bitcoin price has struggled to break a deteriorating structure. In its fall from the $100,000 and $90,000 levels, millions of traders got liquidated with several billion dollars in liquidations.
Bitcoin ETF Shows Mixed Signals: IBIT Buys, Others Sold
December opened on a positive note for the US Spot Bitcoin ETF. BlackRock iShares Bitcoin Trust ETF (IBIT) was the sole seller yesterday ($65.92M).
However, Fidelity (FBTC) bought BTC worth $67.02 million, single-handedly offsetting BlackRock’s sell-off.
BTC ETFs’ net inflows for December 1st stood at $8.48 million. ETH Spot ETFs shed around $79.06 million (BlackRock was the sole buyer). Solana (SOL) Spot ETFs posted net outflows of $13.55 million; XRP Spot ETFs marked an 11-day inflow streak with $89.65 million in net inflows.
Representing some of the world’s largest asset management institutions, BTC Spot ETFs have had net outflows since October. These ETFs collectively held over $169.5 billion in net assets in October, around the same time BTC peaked. Since then, the figure dropped to as low as $110.1 billion.
In October, BTC ETFs posted $3.42 billion in net inflows, but in the following month, the net outflows came in at a whopping $3.48 billion.
Interestingly, Eric Balchunas, a senior ETF analyst at Bloomberg, argued that BTC ETFs accounted for 3% of the selling at max. He was criticising an analysis by Citibank that suggested that for every $1 billion leaving Bitcoin ETFs, the BTC price would fall 3.4%.
Nevertheless, the outflows and inflows loosely trace Bitcoin price. They are a strong indicator of institutional interest in crypto. Moreover, their significance will increase rapidly as more crypto Spot ETFs will enter the market.