The atmosphere is charged in the US crypto arena, heightened by SEC Chair Gary Gensler’s seeming determination to rein in crypto businesses. MicroStrategy Inc’s co-founder and executive chairman Michael Saylor recently spoke to Bloomberg, commenting on this dynamic while painting an optimistic future for bitcoin.
Since 2020, MicroStrategy has posited bitcoin (BTC) as the singular institutional-grade, investable asset in the crypto space. This globally recognized and acknowledged digital commodity has dwarfed other crypto contenders from Saylor’s perspective.
Given the regulatory climate, Saylor articulates that the authorities lack a legitimate forward path for other cryptocurrencies, including stablecoins, crypto securities, and crypto derivatives.
The landscape appears to narrow down to a bitcoin-centric industry, as regulators lean towards crypto exchanges trading and holding only pure digital commodities such as bitcoin.
Crypto exchanges’ existential dilemma
The regulatory constraints raise questions about the survival of US crypto exchanges. Would they be able to sustain their business models if they restrict their offerings to bitcoin and a handful of proof-of-work (PoW) tokens?
Saylor, however, holds an optimistic stance. Despite the ambiguity posed by numerous cryptos and crypto securities aspiring to position themselves as the “next bitcoin,” he believes the market increasingly recognizes bitcoin’s dominance.
As bitcoin dominance in the crypto economy rose from 40 to 48 percent within a year, Saylor forecasts a further rise to 80 percent as other tokens fade. He cites confusion and anxiety as roadblocks preventing institutional money from flowing into the space.
Once clarity replaces confusion, Saylor expects a deluge of institutional investments in bitcoin. The promise of bitcoin’s value increasing tenfold, not once but twice, provides an impetus for crypto exchanges to adapt and pivot their business models, thus ensuring their survival and growth.
The role of crypto exchanges
The upcoming wave of institutional investment signifies a pivotal role for crypto exchanges beyond being mere trading platforms.
As institutions – including pension funds, insurance companies, and banks – join the crypto space, the need for acquiring and securely holding bitcoin will surge. Exchanges would then morph into custodians, facilitating bitcoin transactions.
Companies like Grayscale will rely on these exchanges for custodial services, adding another facet to their business models.
MicroStrategy’s Bitcoin acquisition: a unique approach
MicroStrategy has been uniquely positioned in the crypto space. While operating a profitable software business, the company accumulates bitcoin through institutional-grade bitcoin companies like Coinbase and multiple institutional-grade custodians.
This strategy allows MicroStrategy to access the bitcoin spot markets and tap into equity and debt markets for bitcoin acquisition.
Unlike Exchange Traded Products (ETPs) or trusts, the company can use its operating cash flows, debt issuance, and equity to purchase bitcoin, thus offering bitcoin exposure to institutional investors without charging a fee.
The road ahead: a bullish outlook
Despite regulatory hurdles, Saylor sees a bullish future for bitcoin. Factors such as the upcoming bitcoin halving, explosion in the hash rate, and regulatory clarity from the SEC lay the foundation for the next Bull Run.
While the interplay between regulatory regimes and crypto companies unfolds, bitcoin emerges as a beacon of resilience and potential, fostering confidence in its future growth and dominance in the crypto economy.
