KEY POINTS

  • MicroStrategy CEO Michael Saylor said inflation is decreasing the value of its $500 million cash reserve
  • The company looked for assets that function as stores of value, including gold
  • The MicroStrategy CEO argued that gold is actually not scarce because of the unknown supply left to be mined

Michael Saylor, CEO of publicly-listed company MicroStrategy, said their decision to acquire Bitcoin was a response to the current uncertainty of the economy, which even gold could not be used to bet against because of the clashing interest between miners and investors of the precious metal.

In an interview with Coindesk Tuesday, Saylor recounted MicroStrategy’s thought process when they first purchased Bitcoins.

With $500 million cash sitting in the company’s reserves, he said the value of this cash pile continued to decrease throughout the time that the government printed more money to stimulate the economy. The money supply was steadily growing at a rate of around 5.5% a year.

However, when COVID-19 hit, this supply grew by 20%. When the money supply increases, the value of every dollar decreases. This means the value of MicroStrategy’s $500 million cash pile decreased significantly.

Saylor pointed to real-life cases such as what's happening in Argentina as the outcome of an inflated money supply. Microstrategy was convinced that it had to find an asset that can preserve its value over time. One of the choices was gold, which has thousands of years of history as a store of value. 

Saylor, however, said gold could eventually lose value because it is not really scarce.

“Gold is the least abundant of the commodities, but you can still produce gold,” he told Coindesk.

It is unknown how much gold is left to be mined, with rough estimates pointing to around 20% still below the Earth’s surface. Elsewhere, there is evidence that gold can also be found on the moon.

The MicroStrategy CEO also found the clash of interest between gold miners and “gold bugs” to be concerning because the former wants to mine gold for their livelihood, while the latter hopes that access to more undiscovered gold remains limited to push the price up.

In contrast, Bitcoin has a fixed supply of 21 million BTC and nothing more. With increasing demand, Saylor predicted that even gold investors will soon flee to Bitcoin, and that’s not a question of if but when. 

“Hoarding gold is an antiquated approach to storing value and Bitcoin is a million times better,” he concluded.

Bitcoin In this photo illustration a visual representation of the digital currency Bitcoin sinks into water on August 15, 2018 in London, England. Photo: Dan Kitwood/Getty Images