After MicroStrategy sold 700 Bitcoin, Bitcoin critic Peter Schiff made fun of hodlers.
Peter Schiff, the prominent American stockbroker and Bitcoin critic, criticized Bitcoin bulls for being hopeful about the crypto currency in 2023 despite its 65% decline in 2022.
Schiff first inquired (1) on Twitter if hodlers would sell if the price of Bitcoin reached $5,000; he then asked how low the price needed to be before hodlers realized they were mistaken about Bitcoin.
At the time of publication, around 64,000 people voted. 61.7% claimed they would still hold Bitcoin even if its value dropped to zero, while 8.7% said they would sell at $5,000. Interestingly, nearly 16.3% responded they would sell if the price dropped to $1,000 or less. 13.3% of respondents chose a threshold of less than $10,000.
Bitcoin's value has dropped by over 76 percent since its all-time high of around $69,000 on November 30, 2021, due to several crypto business meltdowns and bleak macroeconomic conditions. Bitcoin followed equities and other risk assets lower as investors sought to de-risk their portfolios in the face of growing inflation.
MicroStrategy Hodling Bitcoin for the 'Good of Human Race'
MicroStrategy's zeal for hoarding remains undimmed despite the bear market, which some fear could develop into a full-blown recession.
On December 22, 2022, the firm added 2,395 Bitcoin to its holdings after buying the dip.
MicroStrategy Executive Chairman Michael Saylor remarked (2) in a recent Twitter Spaces conversation that technocrat Bitcoin investors expect rewards from the macroeconomic climate in five to 10 years.
Contrarily, he said, MicroStrategy is part of a group of maximalists who view Bitcoin as "good for the human race" and whose long-term investments aim to increase Bitcoin's popularity.
Therefore, it is quite ironic that the firm made a $12 million sale of 704 BTC in December 2022 before immediately purchasing $810 BTC.
Though he staunchly adheres to a maximalist worldview, Saylor has acknowledged that the sale of Bitcoin results in a capital loss that can be used to reduce MicroStrategy's capital gains tax on its enterprise software business.
If a business realizes a gain through the sale of an investment during a given tax year, such gain is subject to capital gains tax.
"Acting in tax-efficient ways looks good to our shareholders," he agreed (3). As the head of investor relations at the firm, Shirish Jajodia, recently stated (4), "There is no change to our Bitcoin strategy, which is to acquire and hold Bitcoin for the long term."
'Never. No. We're not sellers'
This deal, however, goes against a pledge Saylor made in a January 2022 interview with Bloomberg. He was asked on Bloomberg Studio 1.0 if MicroStrategy planned to liquidate its Bitcoin holdings in the event of a prolonged bear market.
"Never. No. We're not sellers. "We're only acquiring and holding bitcoin, right? That's our strategy," he said (5).
According to Sean Farrell of Fundstrat, MicroStrategy is using a tax loophole that permits them to sell and buy an asset swiftly. Most crypto currencies do not qualify as securities. Hence they are not affected by the regulations against wash trading.
However, this raises the question of whether or not MicroStrategy will use its Bitcoin reserves to satisfy its shareholders. Already down 73% year to date, its stock price will face further pressure from rising interest rates in 2023.
While developing software to make Bitcoin's Lightning Network accessible to more people, the company may face a large increase in labor costs.