Winner Takes All
Michael Saylor called his shot.
“The best thing is to have 50% fundamentals, 50% pumpamentals. But fundamentals are always decades behind the pumpamentals. When you are sure that the pumpamentals are good, you can move on to the fundamentals” – Ivan Liljeqvist
On Friday, March 8, 2024, a historic event unfolded in the US stock market. Within the span of just a few hours, shares of chip maker Nvidia traded for as high as $974 and as low as $865. With approximately 2.5 billion such shares in existence, the market value of Nvidia swung an incredible $270 billion intraday—more than the total market capitalization of companies like Netflix and Coca-Cola, and equivalent to the entire US Federal Government budget of 1974.
In observation of this mania, we were reminded of Adam Fergusson’s outstanding and deeply unsettling book, When Money Dies: The Nightmare of the Weimar Hyperinflation. His account of people’s behavior as the catastrophe unfolded reveals a German citizenry willing to trade its fiat currency for virtually anything, nominal price be damned:
“Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights…. The population was now engaged in evading taxation and devoting their money to speculative purchases…. Shares in respectable concerns which had paid a 20% dividend, were pushed higher and higher till the final holders could not expect a return of even 1%.”
Not all bouts of rampant speculation are precursors to rapid currency debasements, but nearly all such debasement episodes are marked by them, which explains our longstanding interest in digital assets like Bitcoin and crypto tokens. If accepting a 1% dividend yield was considered the height of irresponsibility a century ago, what does a combined crypto market value of nearly $3 trillion mean for what lies ahead?
The cultural ecosystem that surrounds the digital asset space is both endlessly entertaining and occasionally instructive. Among the more colorful characters is Swedish entrepreneur Ivan Liljeqvist, CEO of Moralis Money and host of the popular YouTube channel Ivan on Tech, which sports more than 520,000 subscribers at the time of this writing. In what has to be among the best 50 seconds on YouTube, Liljeqvist perfectly articulates the zeitgeist. We transcribe his morsel of impromptu genius below, lightly edited for clarity:
“Always guys, respect the pump. I respect the pump in all assets. Why? Because it’s kind of like karma, you know? The power of the pump always comes back to you if you respect the pump of other people. It’s crazy, but I have this belief that whatever pumps, you have to pay respect. Because otherwise if you’re like, ‘Oh my god! This scam coin! This scam coin is pumping again!’ Actually, you are kind of rejecting, you are rejecting the pump from your life.
Maybe it’s a bit out there, you know, ‘woo woo,’ but we all gotta believe in something. And I do believe in the power of the pump. It’s kind of like, you know, ‘Let the pump be with you.’ I went to bed yesterday – I told you guys on Twitter, I told you guys on Twitter – ‘Good night and let the pump be with you.’ Okay? This is how I see… it’s like this force, it’s like this force that is all around us, and if you are really inviting the pump into your life, it will come.”
Perhaps no person has invited the pump into his life more than Michael Saylor, executive chairman and co-founder of MicroStrategy. Long before the courts effectively ordered the Securities and Exchange Commission to approve plain vanilla Bitcoin exchange-traded funds (ETFs), Saylor made his own by converting his fledgling software company into what amounts to a heavily leveraged ETF that holds Bitcoin. With the recent approval of several new Bitcoin ETF vehicles, the flow of money into the sector has been truly astronomical, sending the coin higher and—for now, at least—making a mockery of our prior warnings that Saylor would suffer from his recklessness. (We had yet to appreciate the pumpamentals.)
In the two years since we last wrote about Saylor and MicroStrategy, the price of Bitcoin collapsed by half before more than quadrupling off the lows on the heels of the new influx of fiat. All along the journey—no matter the price or the risk—Saylor has been taking on debt, selling stock, and doing everything in his power to raise cash, buy more Bitcoin, and pump its prospects. History is written by the winners, and few could deny Saylor has been riding high lately. The MicroStrategy story is among the most intriguing in the current book of market narratives, one that may be instructive beyond the superficial scoreboard of gains and losses for the stock or even the price of Bitcoin itself. Let’s explore why.