Lots More with Matt Levine on MicroStrategy's Infinite Money Machine
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What is MicroStrategy’s “infinite money loop” and why does it matter?
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Bloomberg Audio Studios. Yeah, we gotta have more fun around here.
Oh god. Okay, speaking of fun, this is the uh antithesis.
Speaking of fun.
This is the antithesis of fun. So no no no you haven't heard me. Oh
okay, sorry.
So I went to write one of our own.
I did a deadlift.
I'm both the most popular trader and most successful trader at Citadel.
Feta's going viral.
Uh barges.
This is an after school special, except
I've decided I'm gonna base my entire personality going forward on campaigning for a strategic pork reserve in the US. Black gold! These are the the important questions. Is it robots taking over the world? No, I No,
I think that like in a couple years the AI will do a really good job of making the Outlaws podcast. One day that person will have the mandate of heaven.
How do I get more popular and successful?
We do have the perfect gift.
You're listening to Lots More, where we catch up with friends about what's going on right now.
Because even when the odd lots is over, there's always lots more.
And we really do have the perfect guest. So I went to write one of our Authlots newsletters recently and I was gonna write about micro strategy and I had this idea. I was gonna call it Micro Strategy's Infinite Money Loop. And then I was researching on the terminal and I stumbled on a bunch of Matt Levine columns where you actually titled it Crypto's Perpetual Motion Machine. And then I thought, well, I'm not even gonna try to compete with Matt. I'm just gonna ask him to come on the show and explain it to the show. So here we are with Matt Levine, who is of course the author of the Money Stuff column, but also the co host of the new Money Stuff podcast.
That's pretty new. I keep thinking it's two months old, but it's almost a year. Yeah. Wow.
Time flies. I always think twenty twenty was two years ago. Same time.
Yeah, time is a flat circle. Matt, what is MicroStrategy's perpetual motion machine?
Micro strategy. I keep saying perpetual motion machine. I think I'm kidding. I think I'm kidding. I keep I keep hoping that I'm kidding. So MicroStrategy is a pot of bitcoins that issues stock and the stock trades at, call it two times the value of the pot of bitcoins. And so if you have that situation, you sell more stock to buy bitcoins. Because like classically, that's an arbitrage and you close the arbitrage, right? You sell stock that brings down the price of your stock. You buy bitcoins, that brings up the price of Bitcoin. Eventually you get to the point where your stock and the value of the underlying bitcoins is the same. Micro strategy, like it never gets any closer. So they keep selling more stock and buying more bitcoins and that keeps driving the pri the value of the company up.
And so they keep getting more and more valuable.
They have an asset, so to speak, that's not Bitcoin. And that asset is the ability to get like non margin callable leverage, right?
So
I mean
Like
Like if I wanted to borrow Bitcoin or borrow money to buy Bitcoin, I could, but there is a chance that Bitcoin goes down tomorrow. They ask for my money back and I'm homeless.
So this is a thing that they say and that has some truth to it. But This is not a levered way to buy Bitcoin. And the way you know that is that the market cap of the company is two X the value of its Bitcoins, right? So it's like a it's like an anti levered way to buy Bitcoin, right? Like if you put two dollars into micro strategy, you get back one dollar of Bitcoin, which is the opposite of leverage. No, it's true that like and and they do and by the way, also like they they do have the ability to like they're right.
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Chapters
4 chapters
1
What is MicroStrategy’s “infinite money loop” and why does it matter?
0:00–6:03
2
How does Matt Levine define MicroStrategy’s perpetual‑motion‑machine?
6:03–8:46
3
Why does MicroStrategy’s stock trade at twice the value of its Bitcoin holdings?
8:46–16:01
4
How do convertible bonds create a volatility‑trading arbitrage for MicroStrategy?
16:01–16:40
Speakers
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