Economist Saifedean Ammous Doubts Bitcoin Treasuries Can Compete with Michael Saylor’s Strategy

Strategy’s Scale and Cash Reserves Provide Competitive Advantages

Strategy holds the world’s largest corporate Bitcoin treasury with 847,666 BTC purchased for $63.95 billion, as revealed in its recent 8-K filing. The company also reported a $5.02 billion cash reserve intended to cover preferred stock dividends and debt interest.

Economist Saifedean Ammous explained that Strategy’s large Bitcoin holdings enable it to borrow money at lower interest rates, giving the company a significant edge over smaller Bitcoin treasury firms.

According to Ammous, even significant price drops in Bitcoin have not brought Strategy near liquidation danger, as its ample cash reserves allow it to meet financial obligations comfortably.

Financial Model and Market Response to Summer Volatility

During the summer, as Bitcoin prices slipped below $60,000, Strategy’s preferred stock (STRC) traded far below its $100 target price, spotlighting its financing model for market participants.

In reaction, Strategy raised the annual dividend on STRC to 12%, repurchased shares, and bolstered its cash reserves.

To fund dividends and share buybacks, the company sold some Bitcoin but has since resumed accumulating the cryptocurrency.

Business Prospects and Importance of Cash Reserves

Ammous noted that businesses with positive cash flow can allocate surplus funds into Bitcoin as a long-term reserve asset.

He stated that nearly every business should adopt this model, maintaining Bitcoin reserves separate from cash needed for daily operations.

However, Ammous cautioned that investing in Strategy carries risks and expressed a personal preference for directly holding Bitcoin rather than relying on such treasury companies.

Bitcoin Price Outlook and Long-Term Cycles

Ammous suggested that Bitcoin may have already reached its bottom, though he acknowledged the possibility of further price declines if another crash occurs.

He projected that Bitcoin’s next price peak could come in 2029, with prices mostly trending upwards until then.

Smaller market drawdowns could increase Bitcoin’s appeal among large asset managers, as memories of past bear markets fade.

Regarding Bitcoin’s price in 2030, Ammous estimated it might reach around $200,000, based on the power-law model, while noting he wouldn’t bet heavily on this forecast.