Schiff's Accusations and Debate Challenge
Gold investor Peter Schiff has publicly labeled MicroStrategy's business model, which underpins the world's largest Bitcoin treasury company, as a "fraud." On Sunday, Schiff extended a direct challenge to the company's founder, Michael Saylor, proposing a debate. Schiff, a vocal critic of cryptocurrency and Bitcoin, and a steadfast advocate for gold, issued his challenge via X. He suggested the debate take place at Binance Blockchain Week in Dubai, United Arab Emirates, in December. In a separate X post, Schiff articulated his reasoning for the accusation, stating:
"MSTR’s business model relies on income-oriented funds buying its ‘high-yield’ preferred shares. But those published yields will never actually be paid. Once fund managers realize this, they’ll dump the preferreds."
Schiff further elaborated on his concerns, predicting that once fund managers recognize the inability to receive the promised yields, they will divest from the preferred shares. This action, according to Schiff, would prevent MicroStrategy from issuing further debt, thereby triggering a "death spiral" for the company.
Market Context: Bitcoin Downturn and Gold's Resilience
Schiff's bold statements and pessimistic outlook on Bitcoin and the wider crypto market emerged amidst a notable downturn. Bitcoin experienced a fall below the $99,000 level, coinciding with a general decline in the crypto treasury sector. In contrast, gold saw a resurgence, reclaiming price levels above $4,000.
The price of Bitcoin has decreased by over 20% from its all-time high of more than $125,000, which was achieved shortly before the flash crash on October 10. This market event led to the evaporation of tens of billions of dollars in value from the cryptocurrency market.
MicroStrategy's mNAV and Stock Performance
MicroStrategy's multiple on net asset value (mNAV), which represents the premium reflected in the company's stock price over its underlying Bitcoin holdings, fell below 1 in November. However, it has since rebounded to 1.21, according to the company's latest reports. Despite this recovery, an mNAV of 1.21 is considered relatively low, as investors typically look for a healthy mNAV of 2 or higher for treasury companies. MicroStrategy's stock has experienced a significant decline, dropping by over 50% since July, and is currently trading around $199.
Gold's Sustained Strength Above Key Support
In contrast to the volatility in the crypto market, gold has demonstrated resilience. The precious metal has successfully defended the $4,000 per ounce level, even after a brief dip below this significant psychological support. Currently, gold is trading at approximately $4,085 per ounce. Gold reached an all-time high of around $4,380 per ounce in October, with its market capitalization swelling to over $30 trillion before its subsequent retraction to current price levels.