In a recent interview, Michael Saylor, the co-founder of Strategy, took a firm stance defending the company’s Bitcoin-backed credit model against accusations that its structure resembles a Ponzi scheme. Saylor emphasized that the business is focused on monetizing Bitcoin capital gains rather than relying on perpetual equity issuance, a key point in the ongoing debate surrounding the company’s operations.
On May 9, Saylor discussed the market’s reaction to Strategy’s latest earnings call, where he mentioned the possibility of selling Bitcoin to fund dividends on its STRC preferred instrument. This remark sparked widespread attention, particularly given Saylor’s well-known mantra: “never sell your Bitcoin.” In his defense, Saylor clarified that the more accurate statement would be to never be a “net seller” of Bitcoin.
“I’m very famous for saying, never sell your Bitcoin. And that’s why the internet went crazy when we said we might sell it,” he commented. “But if I was being more precise, I’d say never be a net seller of Bitcoin. It just wouldn’t have been so viral or so catchy to say never be a net seller of Bitcoin.”
Debunking the Ponzi Allegations
The controversy intensified after critics, including notable figures like Peter Schiff, suggested that Strategy’s willingness to sell Bitcoin to support STRC dividends indicated a fundamental flaw in the model. In response, Saylor rejected this narrative, arguing that the company’s balance sheet should not be perceived as having zero value, particularly in light of its significant Bitcoin holdings.
“If you had $65 billion worth of something and people wanted to value it at zero, it’s not very good,” he stated. “We don’t want the credit rating agencies to think the company has $0 of assets. We want them to recognize that we have $65 billion of assets.”
Saylor explained that the core business model is straightforward: Strategy issues credit, utilizes the proceeds to acquire Bitcoin, and anticipates that the appreciation of Bitcoin will surpass the costs associated with dividends. He likened this to a real estate firm that raises capital through credit to invest in property, improve it, and later realize gains through sales or refinancing.
“What we want to do is reinforce the business model by selling credit to make a capital investment in Bitcoin, which is digital capital,” Saylor elaborated. “The capital investment appreciates over time faster than the dividend, allowing us to monetize the capital gain to pay the dividend.”
This distinction is crucial to Saylor’s defense against Ponzi allegations. He contended that critics mistakenly conflate the act of selling common equity to pay dividends with the overall economic framework of Strategy’s operations. Historically, the company utilized MSTR equity—essentially a derivative of Bitcoin traded at a premium—to fund dividends, but now seeks to clarify that it may also leverage appreciated Bitcoin directly.
Importantly, Saylor argued that even if the company sells Bitcoin to cover dividend payments, its credit issuance could enable it to acquire more Bitcoin than it sells. He illustrated this point by stating, “If we sell Stretch, if we issue Stretch credit equal to 2.3% of our Bitcoin holdings, that means we will be a net buyer of Bitcoin forever, even if we sell Bitcoin to pay the dividend.”
Saylor shared that Strategy raised $3.2 billion from STRC in April, while facing a monthly dividend requirement of approximately $80 million to $90 million. In this context, he noted that the company would effectively be “buying 30 Bitcoin and selling one Bitcoin,” leading to a net accumulation.
The interview also addressed Schiff’s critiques directly. Saylor remarked that Schiff’s fundamental rejection of Bitcoin makes it improbable for him to accept any credit instrument built on it. “Peter thinks Bitcoin’s a Ponzi scheme. He is not truly an advocate for anything in this space,” Saylor concluded. “Bitcoin is digital capital, and we’ve established a digital treasury company through equity and credit instruments to acquire capital.”
Saylor further described STRC as a form of “digital credit” designed to mitigate Bitcoin’s volatility while generating a defined yield. He explained that Strategy overcollateralizes this instrument, selling “$1 of credit for every $5 of Bitcoin.”
“If you don’t recognize Bitcoin as legitimate, you’ll never acknowledge any derivative on top of it as legitimate,” he stated. “But for those who believe Bitcoin is digital capital and a store of economic wealth in tokenized form, what we’re doing is very straightforward.”
As of the latest updates, Bitcoin was trading at $80,929, illustrating the ongoing market dynamics surrounding this digital asset.
