Michael Saylor made huge news with his announcement that he is seeking to create a "Bitcoin Bank". This is something that he projects could produce a $1 trillion valuation.
He could be right on that. I would not state that something down that road could not be wildly successful. Actually, I think it will be. He understands what the market needs. At the same time, he is also adept at how Wall Street works.
Many will applaud this. Those are the people who care nothing more than having their bags pumped. To them, it is all green candles and the values (or tenets) of Satoshi be damned.
Sure they pay lip service to it. Heck, Saylor was in this camp. It is laughable that people applaud this guy for his approach to Bitcoin.
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Decentralization Needed To Fend Off Michael Saylor
We might be able to make the case that Michael Saylor was the first hijacker of Bitcoin. He is long hailed by the Bitcoin community as a prophet for the industry. He is not. Instead, he is Wall Street in sheep's clothing.
The Bitcoin was purchased by his company, Microstrategy, a publicly traded firm. That means he is under the direct regulation of the SEC. On the surface, this isn't the worst of things but it is an entryway into what was happening.
His accumulation has since been dwarfed by Blackrock. That company, through the Bitcoin ETF, now sits on $23 billion. This far surpasses Saylor's $15 billion (which is still a healthy amount).
When the ETFs (Bitcoin) came out, this really showed how the shift was going in the hands of Wall Street.
Now Saylor is throwing his hat in the ring.
All of this screams centralization. That is the opposite of what Bitcoin was suppose to do. Saylor has more than 250,000 Bitcoin under his control. Blackrock is sitting on roughly 370K Bitcoin.
Bitcoin Bank
Saylor's plan is to open up a Bitcoin Bank, whereby individuals or entities (I bet a lot more of the latter) can purchase different financial products that are created. The money from the sale of these assets will be used to purchase Bitcoin.
Here is some of what he is talking about:
“We are in the core business of creating Bitcoin capital market instruments across equity, convertibles, fixed income, and preferred shares,” Saylor said. This approach aims to give investors exposure to Bitcoin’s price movements while offering various risk-adjusted instruments.
This is Wall Street 101.
Even though Saylor is not Goldman Sachs or JP Morgan, he is thinking like them. Also, if this idea comes into being, he will be under the regulations of all Wall Street banks.
In other words, the difference in Michael Saylor and Jamie Dimon might simply be where they choose to focus their businesses.
Saylor is going to create a playground for accredited investors and institutions. Again, on the surface there is nothing wrong with this.
However, as these products roll out, MIcrostrategy will acquire more Bitcoin. It will be under their control. Instead of 252K, he might end up with a million BTC over time, That would be close to 5% of the total amount that will ever be available.
With the likes of Blackrock and Fidelity floating around, two of the most asset rich institutions in the world, they are certainly not going to let this slide by. We know Blackrock is in the game and Fidelity is looking at it closely.
This might be another feather in the Wall Street cap. What happens when institutions like these control 40%-50% of the Bitcoin out there?
DeFi Needs To Step Up
What Saylor is doing is not really that insightful. The sad reality is that he understands the game while most in Bitcoin stick to ideology.
How many times have we discussed understanding how money truly works? To figure this out, we have to look at those who truly do money: banks.
Saylor grasps this and appears to be on his way to modelling that.
In spite of the applause from the Bitcoin community, this is only a further eradication of Satoshi's vision. I admit that it was flawed from the start due to the fact that fixed money always pools. We are seeing it play out in front of us in real time.
DeFi truly needs to step up. The industry needs business minded people developing the tools that can allow for the construction of these services. While governments will have a fit, if they are truly decentralized (and open source), there is little that can be done.
Once the software hits the Internet, it can spread.
To me, Bitcoin is a lost cause with regards to the tenets and values many within the industry espouse. Its fate is sealed. Large entities will have the majority, leaving very little for the rest of us. Even Saylor came off the narrative of Bitcoin as a medium of exchange, opting for the store-of-value angle.
We can see why.
Now, don't get me wrong. He will likely be successful in creating a feedback loop by selling products that his firm creates, getting money, and buying Bitcoin. This will present huge buy pressure over time which could pump the price. With other firms likely to join in with their ideas, it could be explosive.
This also hands Bitcoin over to Wall Street.
The lesson here needs to be applied to the rest of cryptocurrency. While I think Bitcoin is lost from the values system of the early adopters, crypto is not. The inflationary aspect of the entire industry means that Wall Street cannot control it all. This is the golden nugget in this battle.
We need to see value built. That is where the expansion of tokens and coins switches the storyline. Wall Street will not be in full control if trillions of dollars in value is generated within Web 3.0. The key to achieving this end is nothing more than activity.
With AI, this is going to be something that can really occur on a grand scale. For those who realize this, we will see the massive change within a couple years.
In conclusion, there is nothing wrong with what Saylor is proposing. However, the issue is with who controls it.
Unfortunately, he is doing nothing more than pulling Bitcoin deeper into TradFi.
So buy your Bitcoin and enjoy the ride. It will likely reach much higher levels over time. That said, the idea of decentralized anything with Bitcoin is on the decline.