Anthony Scaramucci, founder and managing partner of the hedge fund SkyBridge Capital, says that all the hand-wringing about the massive Bitcoin purchases and debt being taken on by Michael Saylor’s MicroStrategy is overblown.
“People think if Bitcoin crashes, he is going to implode, and as a result of it, leverage is going to unwind in the system and there’s going to be a collapse,” Scaramucci said in an interview Friday. “But if you really study his balance sheet, he has long, long-term debt, and he has rolling long-term debt. You’d have to have a systemic collapse in Bitcoin, and you’d have it to last six or seven years to flash him out.”
The dot-com-era software maker turned Bitcoin proxy — whose shares are held in a fund SkyBridge sub advises — has mesmerised Wall Street this year with a more than 400% share surge while gobbling up billions of dollars of Bitcoin financed through the sale of stock and convertible debt.
That has also given rise to concern that if Bitcoin’s price were to drop, MicroStrategy could have trouble repaying its debt, and may need to offload its coin holdings, depressing Bitcoin price further.
“The narrative of him being forced to sell hundreds of thousands of tokens into the market, I think it’s a forced narrative,” Scaramucci said. “But I base that on having been on Wall Street for 35 years, I understand what imploded Lehman Brothers,” and that was their debt structure.
MicroStrategy has about US$7.2 billion ($9.76 billion) in outstanding convertible debt, including around US$6 billion sold this year.
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The convertible securities have been a favorite with hedge funds, who use the notes in market-neutral arbitrage bets that exploit the surging volatility of the underlying asset.
First Trust SkyBridge Crypto Industry and Digital Economy ETF, sub advised by SkyBridge Capital II, LLC, lists MicroStrategy as a top-three holding, according to its website.
Saylor, who wrote the foreword to Scaramucci’s new book on Bitcoin, “has really thought out how he is going to do this,” Scaramucci said. “He’s created this positive flywheel by issuing debt and equity.”
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Bitcoin has retreated after reaching its all-time high of more than US$108,000 on Tuesday amid optimism about President-elect Donald Trump’s pro-crypto policies. While many advocates predict the original cryptocurrency — with a total market value of around US$1.9 trillion - will resume its record-breaking surge, Scaramucci said it’s hard to predict price moves.
“The big problem is, you can never really predict what it’s going to be,” Scaramucci said. “But if you said to me, could we have a 30% to 40% correction in crypto next year, bring it back to US$60,000-US$70,000 — absolutely.”
Still, he said, the introduction of US exchange-traded funds investing directly into Bitcoin earlier this year, and likely upcoming favourable legislative actions should keep Bitcoin’s price above US$50,000. And the coin is likely to continue appreciating longer term, he said.
“Could it get to US$18 trillion dollars” in market cap, Scaramucci said. “We believe that it could. Is it a direct line to US$18 trillion? No.”
