Oddbean new post about login | logout I dunno. It’s the kind of thing that’s obvious in retrospect but not obvious before hand. In fact, it’s closely aligned to the bitcoiner meme of selling your extra chairs to buy bitcoin. This is different than borrowing money to buy bitcoin.
It is living off of the trapped FI guys who can only buy bonds and converts. That money has nowhere to go besides MSTR; literally only can buy debt offerings. They actually bought converts at 0% yield. Paid for the option to convert to equity. They would pay a negative rate if the offered because the bond market is so mispriced. We're entering VERY scary Tradfi territory.
Can you elaborate on why it’s scary tradfi territory?
There is a TON of money in fixed income land that can only get a yield of 1-5%. There are large swaths of capital and managers that are obligated to only purchase Fixed income (read Bonds) products. Those managers can purchase MSTR bonds (these are convertible bonds). Converts are convertible to stock at a certain point in the future. MSTR issues convertible debt and fixed income managers are willing to loan MSTR money for the ability to convert that debt into stock shares in the future. So as a fixed income manager who is stuck in the land of manipulated and artificially low interest rates the ability to get that money into a debt offering that gets you out of that dead money trap is a buy all day long.
Agreed. Rules on how companies use their money may have made sense before bitcoin, but now they’re hamstringing tradfi investors.
Most all of the Tradfi money will never make it over. It was all fake to begin with anyway.
So WHY won’t the tradfi money make it over? HOW / WHY exactly is the money / value trapped in Tradfi?
Because some managers and Funds are obligated to own Bonds and Fixed income products by their investors. Like 10% of their portfolio for example must be allocated to Bonds. That in recent history has been just burning money but they are obligated to own it . Now MSTR offers them something (convertible bond offering) in that space that actually performs and managers will buy up every offering that they possible can.
Unless the owners of those funds (pensioners. employees, retirees) actually go in and sell their retirement funds and move it themselves (never going to happen). That money will never be ported into the bitcoin universe, it will be permanently stuck in Tradfi land. The wealth is fake there. It's fake numbers. Fake money.