Bitcoin champion MicroStrategy decries Bitcoin ETFs over fees

Bitcoin champion MicroStrategy decries Bitcoin ETFs over fees
MicroStrategy co-founder Michael Saylor previously said spot ETFs would be the “supertanker” for his Bitcoin “sports car.” Credit: Andrés Tapia
  • In a Tuesday earnings report, MicroStrategy showcased what it says are advantages compared to spot Bitcoin ETFs.
  • Commentators cast doubt on MicroStrategy’s comparison, citing “idiosyncratic risks” to the company’s business model.
  • BlackRock and Fidelity have accrued billions in Bitcoin through their ETFs over the past month.

MicroStrategy took aim at spot Bitcoin exchange-traded funds during its earnings presentation on Tuesday, saying it has several advantages those products don’t have.

The world’s largest corporate holder of Bitcoin made its case on the back of its stock plummeting by 25% this year, while Bitcoin has held flat at around $44,000.

MicroStrategy v ETFs

The software company emphasised its unique selling points compared to recently-approved US spot Bitcoin ETFs in its latest earnings presentation.

Since the January 10 nod from the US Securities and Exchange Commission, ETFs run by Wall Street giants like BlackRock and Fidelity have raked in billions.

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Before Bitcoin ETFs were approved in the US MicroStrategy had been viewed as a proxy for investing in the digital asset. MicroStrategy highlighting its “value proposition” versus the new funds marks a shift in its stance towards spot Bitcoin ETFs.

Last year, MicroStrategy co-founder and Chairman Michael Saylor said spot ETFs would be the “supertanker” for his Bitcoin “sports car.”

He cited retail inflows as a reason why ETFs would be a good thing for MicroStrategy stock and Bitcoin, and reiterated the company as a high performance Bitcoin proxy.

Now, the company touted its lack of management fees as a selling point in contrast to ETFs that take a percentage on investments made by investors.

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ETFs also lack the ability to develop software or generate cash from operations, and do not benefit from the ability to leverage capital markets, MicroStrategy said.

As of February 5, MicroStrategy holds 190,000 Bitcoin, purchased for an aggregate purchase price of $5.9 billion. Its holdings now have a market value of $8.5 billion.

The company acquired 56,650 Bitcoin in 2023 at an average price of $33,580, or $1.9 billion.

“We are able to use cashflows as well as proceeds from equity and debt financings to accumulate Bitcoin, which serves as our primary treasury reserve asset,” the company wrote.

While Grayscale’s GBTC spot Bitcoin ETF has $20 billion in Bitcoin under managetment, more than double that of MicroStrategy, it has hemorrhaged nearly $10 billion over the past month, largely to newer ETFs offering lower fees.

The other nine ETFs that went live in January are now roughly on par with MicroStrategy with a combined $8.5 billion worth of Bitcoin.

Some experts didn’t buy MicroStrategy’s arguments.

“MicroStrategy has a materially different profile than spot Bitcoin ETFs,” Nate Geraci, president at ETF Store, told DL News.

He pointed to “idiosyncratic risks” posed to the company, such as Saylor’s critical role as “key man,” and the risks inherent in MicroStrategy’s use of leverage.

“While MicroStrategy has certainly had stretches of significant outperformance as well, the point is that investors shouldn’t view MicroStrategy as a spot bitcoin ETF proxy — let alone as some sort of superior alternative.”

Crypto market movers

  • Bitcoin jumped around 1.6% since Wednesday, trading around $45,100.
  • Ethereum remained flat at $2,400.

What we’re reading

Tyler Pearson is a junior markets correspondent at DL News. He is based out of Alberta, Canada. Got a hot tip? Reach out to him at ty@dlnews.com.

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