Charles’ Note: I like making money in Bitcoin. It’s satisfying to see it up over 150% in our Freeport Investor model portfolio. 

But that’s not why I recommended it… or why I own it myself. Speculative profits were always just the icing on the cake. 

I own Bitcoin – along with gold and other “anti-dollars” – because it’s a refuge from a corrupt banking system presided over by an acquiescent Federal Reserve. It’s a way to store wealth outside of the system… and outside of the inevitable failures and bailouts.

But this is also why I believe you should own Bitcoin as directly as possible. My preferred method to hold my own Bitcoin is via a self-custodied wallet. I take responsibility for it myself. 

ETFs are also a viable option, particularly if you’re wanting to own the crypto in a retirement account. 

But where does that leave speculative plays via the shares of companies converting their cash balances to Bitcoin? 

Strategy (MSTR) led the way there, followed by GameStop (GME), Trump Media & Technology Group (DJT), and others. 

To answer that, I’ll pass the baton to James Hickman, my fellow libertarian traveler and co-founder of Schiff Sovereign. James is a lifelong entrepreneur and investor who’s traveled to more than 120 countries on all seven continents. In addition, he’s started, invested in, or acquired businesses all over the world. 

Take it from here, James. 

This Is a $118 Billion “Strategy” for Insanity

By James Hickman, Co-Founder, Schiff Sovereign

Recently I wrote about America’s new stablecoin legislation (bizarrely called the “GENIUS Act”). I explained that I am pro-crypto and have been since the early 2010s. For me, it’s about freedom.

Many banks have proven time and time again that they simply cannot and should not be trusted with their customers’ money.

Wells Fargo is the poster child for blatant theft and deceit. 

Bank of America is currently the prime example of recklessly irresponsible decision-making. It has racked up more than $100 billion of unrealized losses from bad investments made with YOUR money.

Crypto eliminates all of this. 

You can store your savings (whether as a risk asset like Bitcoin, or via U.S. dollar stablecoins) and transact without having to deal with a bank. This is a massive benefit.

But a comment I made in that article about the Bitcoin company, “Strategy,” formally known as MicroStrategy, raised a lot of questions. 

I wrote, 

… as the oldest cryptocurrency, [Bitcoin] is also the most technologically obsolete… therefore it should not be the most valuable. No other sector places the highest value on the most obsolete technology. Only crypto. And that’s a bit odd.

There are plenty of other oddities. For example, it’s strange that the company Strategy (formerly Microstrategy) has an enterprise value of $112 billion, even though its only asset is $61 billion worth of Bitcoin.

In other words, the company is worth nearly twice as much as the Bitcoin that it owns. This is bizarre and doesn’t make any sense.

So let’s dig into that more.

By its own description, Strategy is a “Bitcoin Treasury company.” Its primary business is to own Bitcoin.

And it owns a lot of Bitcoin – 580,955 to be exact. That’s worth $62.6 billion at the current price. 

Yet the company’s enterprise value is more than $118 billion, or nearly twice the value of its Bitcoin. 

This is one of the strangest things I’ve ever seen in financial markets.

Yes, technically, Strategy also has a software business, but it’s barely mentioned.

Just have a look at Strategy’s own Q1 update. It’s a 92-page presentation that has precisely one slide (#26) devoted to its software business. 

Literally one slide. 

And there isn’t even much detail. The slide is entitled “Software Highlights” and only shows top-level revenue.

In other words, the company’s own presentation spends about 1% of its time talking about the software business without bothering to mention whether or not it’s even profitable.

(It’s not profitable… if you read the footnotes and financial addenda, you’ll see that Strategy’s “cloud-based, AI-powered” software loses a ton of money.)

The other 99% of the presentation talks about Bitcoin. 

Strategy makes no bones about it. It is a Bitcoin company. Full stop.

And if it’s not talking about Bitcoin, it’s talking about how much money it’s going to raise, to buy more Bitcoin.

Strategy’s current plan calls for a whopping $42 billion in new capital… a number it seems to have landed on not through hardcore financial analysis, but as a joke related to Hitchhiker’s Guide to the Galaxy in which “42” is the answer to the ultimate question of life.

It will raise half of this $42 billion by indebting the company more, and the other half by diluting existing shareholders.

Management’s ultimate goal is to increase the average number of “Bitcoin per share” that the company holds. 

That’s not unreasonable. But for this to happen, there are a number of things that have to go right – from cybersecurity to crypto markets – nearly all of which are beyond their control.

They don’t seem to have given these risks much thought. They assume, for example, that the Bitcoin price will appreciate by 30% per year.

And there are a number of very attractive charts, several of which demonstrate how high Strategy’s stock price will go in various scenarios. They show graphs with lines that start from the bottom left and soar to the top right, and there seems to be no credible way in which investors could lose money.

Then they polish it all off with made-up metrics like “Bitcoin Yield”, “Bitcoin Multiple,” “BTC $ Income,” and my personal favorite, “Bitcoin Torque.”

Strategy ends up disclosing six full pages of definitions just to explain what the hell they mean with these new terms.

For example, they humbly admit that “BTC $ Income is not equivalent to ‘income’ in the traditional financial context.” 

In other words, it’s not income. 

But they’re calling it income anyway.

Honestly it reminds me of Adam Neumann making up his own financial metrics when he infamously published WeWork’s “Community Adjusted Earnings” several years ago.

Strategy concludes its Q1 update by asking shareholders to spread the word and “educate their peers” about Bitcoin and MicroStrategy securities. What it means is: help us keep this bubble going by finding more people to overpay for our assets.

And that’s exactly what it is.

Again, based on its stock price, Strategy is worth around $118 billion. Its BTC holdings are only worth $61.5 billion. 

Anyone who buys Strategy stock solely for the Bitcoin exposure is therefore overpaying by 2X.

Buying Strategy stock is the equivalent of paying $216,000 for Bitcoin today. 

If you’re willing to pay $216,000 for Bitcoin today, contact me right away and I’ll gladly sell you some of mine.

Strategy doesn’t hide from this insanity either. 

In fact, it’s leaning into it. It even tracks this on its website under the metric “mNAV”, i.e. the multiple by which investors overpay for the company’s Bitcoin.

Its presentation actually tries to rationalize this phenomenon. Management claims the 2X mNAV is justified because the stock is volatile (which attracts traders) or that its “brand recognition and scale drive superior investor interest.”

Some of their financial models even assume that this mNAV will increase to 3X!

Maybe so. 

But the bottom line is that there’s most likely a lot more upside to own Bitcoin directly. 

And the hard truth is that if you can’t figure out how to own Bitcoin directly, you probably shouldn’t bother buying Bitcoin to begin with… let alone paying twice (or three times) the price for it.

To your freedom,

James Hickman

Co-Founder, Schiff Sovereign