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GM. This is Milk Road, the newsletter that yields insights and laughs (compounded daily).
Here’s what we got for you today:
- ✍️ $MSTR’s ‘Bitcoin strategy’ explained
- ✍️ Bhutan has quietly mined 13,000+ $BTC
- 🥛 PRO “Where are we in the cycle?” indicators
- 🎙️ The Milk Road Show: FED Rate Cut Tomorrow! What It Means for Crypto?
- 🍪 USDC is expanding to the Sui network
Prices as of 9:30AM ET. Click here for our Fear & Greed Index
$MSTR’S ‘BITCOIN STRATEGY’ EXPLAINED 💰
Michael Saylor is like that kid in elementary school that always kept his Pokémon cards in plastic sleeves.
(He saw value early on, where others didn’t).
Since his company, MicroStrategy ($MSTR), began implementing its ‘Bitcoin Strategy’ in August of 2020 (aka buying as much $BTC as humanly possible), its market cap has 20x’d. 🤯
And now Saylor is gearing up to once again to sell $700M worth of convertible notes (aka cash loans that can be converted into discounted $MSTR shares in the future), presumably to buy more $BTC.
…but why does this strategy work?
Here’s some back of the napkin math that will make you go “Damn, Michael – that’s a big brain you got there!”.
$MSTR takes out plain old debt, and sells convertible notes in order to gobble up more $BTC.
On the debt, it pays 1.7644% p/y. On the notes, it pays 0.875% p/y.
$MSTR’s total combined debt obligations (inc. convertible notes) currently sits at $3.9B – and interest on that debt at the highest rate (1.7644% p/y) would be ~$68M p/y.
“Ok, nerd – get to the point!”
Seen and heard. Here’s the kicker you’re looking for:
MicroStrategy isn’t just a Bitcoin treasury – it also has its own software business that generates solid revenue.
Last quarter, $MSTR saw a gross profit of $80.5M, indicating that its yearly debt obligations can be more than covered by its software business. 💸
All the while, the company’s treasury gains exposure to Bitcoin’s price appreciation – which is 12.2% YTD on $MSTR’s holdings – and, as an asset, shows an average annualized return of 45% over the past 5 years.
Taking that annualized return into account, if it continues into the future, it will mean MicroStrategy will be seeing a compounding 43.23% return per year (after paying its debt obligations) on every dollar it puts into $BTC .
(Infinite money glitch anyone?).
“That’s nice for MicroStrategy. But why would I buy $MSTR in order to gain exposure to Bitcoin when I could just buy $BTC directly?” – you, probably.
Buying/holding $MSTR comes with certain…perks – like regulatory certainty, and more importantly: Price performance.
Given that $MSTR never sells its $BTC, during the bear market the value of MicroStrategy stayed almost identical to the value of their $BTC holdings.
While in bull markets the value of the company seems to be valued at a premium against its Bitcoin. 👇
To the extent that, in today’s current market, when MicroStrategy buys $1B worth of $BTC — its market cap is moving up $2B over time (assuming the price of $BTC stays flat).
…by that same logic, whenever $BTC goes up by $1 in today’s market, $MSTR’s market cap should go up by $2 for every BTC that it holds (though the same is also true to the downside).
It's obviously not an exact science, but a generalization over time.
The real question is — how high will the MicroStrategy premium go as we enter the Banana Zone??
Say it with us now:
“Damn, Michael – that’s a big brain you got there!”. 🧠
🤔↓
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BHUTAN HAS QUIETLY MINED 13,000+ $BTC 🤯
This is Bhutan:
This is Thimphu, its capital city:
Some fun facts about Bhutan:
- It favors ‘Gross Domestic Happiness’ over GDP (which is ~$3.11B)
- It has a population of around 780k people (that’s less than San Francisco)
- It has the 5th highest $BTC holdings of any country in the world (above even El Salvador)
Wild right? Now get this:
Bhutan has been quietly mining $BTC (powered by the country’s hydropower resources) to the point that its $780M Bitcoin holdings are now equal to 25% of its total GDP! 🚀
To put that another way: Bhutan now has $1,000 worth of Bitcoin for every one of its 780,000 citizens (!)
Ok, now – let’s reframe and wrap this all up in a neat little bow…
Instead of mining resources/generating energy, before exporting it through continent-spanning physical infrastructure networks, Bhutan has exported their energy digitally.
(Selling its energy to the Bitcoin Network, on site).
In the process, Bhutan has created a nest egg that could match, or even outpace its total GDP if/when we see a $250,000 Bitcoin.
The takeaway: This brings a whole new meaning to the concept of ‘energy exports.’ 🤯
🤔↓
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PRO “WHERE ARE WE IN THE CYCLE?” INDICATORS 🤔
Ogres have layers, like onions.
Crypto has cycles, like a washing machine.
We won’t be covering the former today (that’s what our doctoral dissertation was for), but instead on the latter…
Crypto moves in cycles, and knowing where we are in the current cycle is crucial for capturing the best opportunities.
The goal is to spot the bull market peak before the inevitable bear market hits your bags hard.
Since timing the top perfectly is almost impossible, we use various indicators to give us a better shot at taking profits before it's too late.
Below are the 5 indicators we track, with a color-coded system to show how close they are to signalling the market peak:
🟢 Plenty of room to run 🏄
🟡 Getting closer to the top signal, but haven’t yet reached the mark ⚠️
🔴 We’ve hit the market top indicator 🚨
Every Tuesday, we update these 5 indicators exclusively for PRO members.
Our advice? Don't wait for all of them to hit 🔴. It's better to take profits as they get closer to that point.
Let's dive in and see if we're anywhere near the top of this bull market. 👇
GO PRO AND UNLOCK:
- Full access to the 5 bull market peak indicators above to help you spot the bull market top before it’s too late
- Full access to the Milk Road PRO Portfolio 📈
- NEW: Our yield strategies 👀
- Weekly reports that will help you invest successfully in crypto 💰
- Access to the PRO Community, where the Milk Road crew & 100s of fellow PROs talk crypto 🫂
- 50% OFF the Crypto Investing Masterclass
PRO REVIEW OF THE WEEK
BITE-SIZED COOKIES FOR THE ROAD 🍪
Uphold is your go-to platform for investing in crypto, global currencies, and precious metals. It’s designed to offer everything you need in one sleek, user-friendly space.
The $USDC stablecoin is expanding to the Sui network, adding support for over 15 blockchains. The integration will enhance transaction speed and interoperability through the Cross-Chain Transfer Protocol (CCTP).
DBS Bank will introduce over-the-counter crypto options and structured notes for institutional clients in Q4 2024. These new products will focus on Bitcoin and Ethereum, offering strategies to manage portfolio volatility.
WalletConnect will airdrop 185M $WCT tokens starting September 24, 2024, to eligible users. The tokens will remain non-transferable until 2025, with a focus on supporting the platform’s decentralization.
Ethereum staking is your chance to lock up $ETH, secure the network, and earn rewards. It’s a win-win for your wallet and the blockchain.
Join forces with the Milk Man! We’re looking for a Twitter Specialist + Content Creator who can mix crypto knowledge with top-notch tweets. Think you’re the one? Apply today and let’s get this show on the road!
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
