Financial market commentator Peter Schiff on Tuesday criticized Michael Saylor's comparison of MicroStrategy Inc.'s (NASDAQ:MSTR) debt-financed Bitcoin (CRYPTO: BTC) buying strategy to Manhattan real estate.
What Happened: In an X post, Schiff disagreed with Saylor's analogy. "Real estate generates rents, which can be used to service and repay debt. Bitcoin doesn't generate any income to make interest or principal payments," he argued.
It's wrong for @saylor to compare his leveraged buying of #Bitcoin to investors borrowing money to purchase Manhattan real estate. Real estate generates rents, which can be used to service and repay debt. Bitcoin doesn't generate any income to make interest or principal payments.
— Peter Schiff (@PeterSchiff) December 17, 2024
Spencer Hakimian, founder of hedge fund Tolou Capital Management, countered Schiff's viewpoint, stating that, unlike the Manhattan real estate industry, Bitcoin doesn't have any expenses or maintenance.
Schiff responded that rents from real estate exceed the expenses.
The city's rental market contradicts national trends, with the top 50 markets experiencing 15 consecutive months of rent decreases. In October 2024, New York's median asking rent increased 1.7% year-on-year to $3,374, representing a 13.1% increase from pre-pandemic values. Manhattan's median monthly rent stood at $4,750 as of this writing, according to Realtor.com.
Why It Matters: This criticism comes after Saylor defended MicroStrategy's Bitcoin acquisition strategy by equating it to Manhattan's real estate industry. He said that just like developers in Manhattan issue more debt to develop more real estate when its value goes up, MicroStrategy capitalizes on high returns from Bitcoin to buy more Bitcoin.
Schiff's critique adds to the ongoing debate around MicroStrategy's Bitcoin strategy. Earlier, he warned that the company's commitment to repay a large sum of money to convertible note holders could be a potential risk if the price of Bitcoin falls sharply.
Well-known cryptocurrency analyst Willy Woo also flagged the risk associated with the firm's convertible debt offerings, stating that if buyers do not convert to shares before maturity, MicroStrategy would be forced to sell Bitcoin to repay them.
Price Action: At the time of writing, Bitcoin was exchanging hands at $105,351.94, down 0.86% in the last 24 hours, according to data from Benzinga Pro.
Shares of MicroStrategy closed 5.41% lower at $ 386.42 during Tuesday's regular session. The stock has a consensus price target of $449.5 based on the ratings of 12 analysts, with an average price target of $546.67 between Bernstein, TD Cowen, and Barclays.
Image via Flickr/ Gage Skidmore
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