- Top investor Ross Gerber has issued a sharp critique of Michael Saylor’s Bitcoin strategy
- He calls the model “crazy bad math” due to the high premium on Strategy’s (MSTR) stock
- He warns that a price collapse could trigger a massive, forced sell-off that could “wreck” Bitcoin
Ross Gerber, co-founder of Gerber Kawasaki Wealth and Investment Management, has criticized Strategy’s approach to investing in Bitcoin.
According to Gerber, the pattern adopted by Michael Saylor’s Strategy could trigger the end of Bitcoin should things go wrong and the price collapses.
The “Crazy Bad Math” of the Strategy Premium
The veteran investor took issue with the company’s model of issuing stock at an inflated valuation to buy Bitcoin without having a “real underlying business.” He called it “crazy bad math” for investors who are buying the stock to get exposure to Bitcoin.
Related: If You Bought Gold Instead of Bitcoin or MicroStrategy, You’re Up 27%, Says Peter Schiff
He’s pointing to the fact that Strategy’s stock (MSTR) trades at a significant premium to the firm’s actual Bitcoin holdings—currently around 1.61x. This means you’re paying a 61% premium to own Bitcoin through Strategy’s stock compared to just buying it on the open market.
What Happens If the Bitcoin Price Collapses?
Gerber considers Strategy’s approach a form of dangerous over-leveraging. He warns that if Bitcoin were to enter a major pullback, it could trigger a massive, forced sell-off from investors in the stock. This, he argues, could plunge the Bitcoin market into “unprecedented chaos.”
His warning is particularly timely. TradingView’s data shows that Bitcoin has experienced a significant pullback in the past six days. The cryptocurrency retraced from $124,517, its latest all-time high, to $114,442, marking an 8% pullback.
Related: Strategy (MicroStrategy) Hit with Class Action Lawsuit Over Its Bitcoin Plan
That retracement returned Bitcoin to the 0.382 Fibonacci support level, and breaking below that level could see the pioneer cryptocurrency head for lower targets within the $112,000 and $110,000 region.
Strategy is renowned for its bullish approach toward Bitcoin investment. It remains one of the top investment companies that repeatedly declared its belief in the long-term growth of Bitcoin.
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Source: https://coinedition.com/ross-gerber-slams-michael-saylors-bitcoin-strategy-as-crazy-bad-math/