Shares from business specialist and cryptocurrency investor MicroStrategy (NASDAQ: MSTR) fell as much as 23.2% on Tuesday morning. Bitcoin prices fell by about 10% this morning while MicroStrategy’s CEO Michael Saylor consolidated his commitment to the leading cryptocurrency in a CNBC interview. At 11:40 AM EST, the stock had recovered slightly to a decline of 20%.
Cryptocurrencies have posted significant price declines over the past two days amid criticism from key thought leaders such as Microsoft co-founder Bill Gates, Treasury Secretary Janet Yellen and Tesla CEO Elon Musk. Yellen claims that Bitcoin is speculative and inefficient as a medium for settling financial transactions. Gates believes that Bitcoin may be useful for large companies and institutional investors, but it is more dangerous than promising for individuals. Musk, whose company invested $ 1.25 billion in Bitcoin earlier this month, also says the currency looks overvalued right now. Therefore, the fall in cryptocurrency prices, which began over the weekend on Tuesday, continued.
MicroStrategy has invested $ 1.145 billion in Bitcoin, converted its long-term cash reserves into cryptocurrency stocks and then added more with the help of new debt securities. Therefore, large changes in Bitcoin prices also tend to have an immediate effect on MicroStrategy’s shares.
On that note, Saylor hit the airwaves on CNBC Squawk Box on Tuesday morning and defended its Bitcoin investment from a long-term perspective even as currency prices continued to fall. Eventually, Saylor said that Bitcoin will replace gold as the gold standard for long-term securities.
“There are $ 10 trillion dollars in gold in there, $ 1 trillion in bitcoin. Bitcoin will turn gold and it will cover the entire gold market ceiling,” says Saylor. “Then it will raise negative government debt and other monetary indices until it grows to $ 100 trillion.”
According to Saylor, Bitcoin is not designed for expenses and money transfers but for long-term savings. That approach reflects what Social capital hedosophy founder Sade Chamath Palihapitiya in a Bloomberg video last week.
“The real question I think people should ask us is OK, Bitcoin is becoming a de facto reserve currency that basically displaces gold,” he said. “What replaces the US dollar?”
Like Saylor, Palihapitiya believes that Bitcoin has significant value as a long-term value-added tool, while other cryptocurrencies will deliver game-changing upgrades to other types of financial transactions such as everyday purchases, loans, insurance and digital banking.
That commitment can serve MicroStrategy well in the long run, provided Saylor and Palihapitiya are on to something here. At the same time, Saylor’s companies have been exposed to cryptocurrency risks and short-term volatility as today’s sudden decline.
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