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Michael Saylor: Why Bitcoin Is NOT ‘A Textbook Example of Irrational Exuberance’



In a recent interview, Michael J. Saylor, Co-Founder, Chairman, and CEO of Nasdaq-listed business intelligence company MicroStrategy Inc. (NASDAQ: MSTR) addressed one of the most common criticisms of Bitcoin.

On 11 August 2020, MicroStrategy announced via a press release that it had “purchased 21,454 bitcoins at an aggregate purchase price of $250 million” to use as a “primary treasury reserve asset.”

Saylor said at the time:

Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively.

Since then MicroStrategy has continued to accumulate Bitcoin and its CEO has become one of Bitcoin’s most vocal advocates. MicroStrategy’s latest Bitcoin purchase was announced by Saylor on March 12, when he disclosed that his firm has so far bought (and held) roughly 91,326 bitcoins for an aggregate cost of $2.211 billion, i.e. for an average cost per bitcoin of $24,214.

Earlier today, TIME published as an article the transcript of its recent interview with the MicroStrategy CEO. One of the most interesting parts of this interview was when TIME deputy editor Eben Shapiro asked Saylor the following question:

I’m going to read Nobel Prize winner Robert Shiller’s quote about irrational exuberance. ‘Irrational exuberance is the psychological basis of a speculative bubble. I define a speculative bubble as a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, and, in the process, amplifies stories that might justify the price increase and brings in a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.’ Is Bitcoin not a textbook example of irrational exuberance?

Saylor replied:

No, it’s the opposite. It’s a textbook example of a rational action in response to monetary inflation. Can we agree that the money supply is expanding in an unprecedented fashion the past 12 months everywhere in the world? If you’re going to make a rational investment decision today, whether you’re a real estate investor, a stock investor, a bond investor, or just a wage earner or you’re a treasurer, you have to estimate the rate of monetary expansion for the next eight years. We know there’s a commitment to run deficits, and we know this commitment to stimulus.

So now the issue is, What’s a rational behavior? I’ve got to find a store of value. If you’re looking for an example of real speculation, it would be people speculating upon whether they can squeeze others in a short squeeze and a small stock, like GameStop. Bitcoin is not speculation, O.K.? Bitcoin is a unique new technology, it’s like the Facebook of money or the Google of money. And it grew from nothing to a trillion dollars in monetary value in 12 years.

Shapiro’s article about Saylor, which is titled “Why MicroStrategy CEO Michael Saylor Bet Company Cash on Bitcoin—and Wants Other Corporations to Join In”, appears in the 29 March 2021 issue of TIME magazine.

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