Welcome to the ‘Hotel Crypto’

Katie Martin (0:10)

Heaven knows we've tried to avoid it, but eventually, you know what? This here podcast has to talk about crypto. There is a ton of interesting stuff going on at the moment, from stable coin regulation in the US to an obscure Japanese hotel developer that's decided to turn itself into a machine for buying Bitcoin. The price of Bitcoin itself, by the way, is up a lot this year to almost $110,000 a pop. Today on the show, we are grasping the nettle, bracing for the inevitable influx of aggressive emails and telling you what you need to know about all this crypto jazz. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I'm Katie Martin, the markets columnist here at FT Towers in London, and I have a stupid cold, which is annoying. Joining me through the magic of the internet all the way from New York City is the big man, first Sea Lord Robert Armstrong, senior executive vice president of the Unhedged newsletter. Rob, how are you doing? Have you got a cold or no?

Robert Armstrong (1:14)

No, I feel all right, man. I'm sorry you are poorly, as you English people say.

Katie Martin (1:21)

Now, listeners, if you are a crypto maximalist and you hate everything that we say and stand for, please be advised. Rob's email address is robert.armstrong at ft.com. I have had enough haters in my inbox lately, so please feel free to send me feedback.

Robert Armstrong (1:39)

That's because you made a movie about Bitcoin.

Katie Martin (1:42)

That was one of my mistakes.

Robert Armstrong (1:44)

Yeah. We'll get to that movie shortly, I'm sure. But that brings in the emails when you go and make a movie, Katie. I can't say you weren't, you know what I mean?

Katie Martin (1:52)

No. Given that, why are we doing this to ourselves? Why are we talking about crypto today?

Robert Armstrong (1:59)

Because of this hotel, because of the Bitcoin Hotel, Katie.

Katie Martin (2:03)

There's so much weird stuff here. It's a Japanese hotel development group called, I believe, MetaPlanet.

Robert Armstrong (2:10)

MetaPlanet.

It was a hotel development group. Now, it is a Bitcoin buying entity. There should be a name for these things, these companies all modeled on MicroStrategy. Yet, used to do something else and then decide it's a better gig just to be a machine that buys and accumulates Bitcoin.

Katie Martin (2:37)

Yeah. So MicroStrategy, which is now called Strategy, is like the OG of this stuff. Like you say, it used to be a software company, and then it decided, nah, wouldn't it be more fun if we just bought Bitcoin for a living? And this is kind of starting to catch on. So MetaPlanet, this Japanese hotel group or former hotel group said it was going to borrow four and a half billion dollars to buy Bitcoin.

Robert Armstrong (3:03)

Well, let me just tell you, before you even start making fun of MetaPlanet and its minions, that stock over the last year is up something like 2,500 percent. So don't laugh at those returns. Whatever they're doing, it's working right now, Katie.

Katie Martin (3:25)

That's the thing. Like a lot of these companies that do this chiefly strategy, formerly MicroStrategy, but now also MetaPlanet, they've made their shareholders a lot of money.

Robert Armstrong (3:37)

Loads.

Katie Martin (3:38)

Props to them.

Robert Armstrong (3:40)

And the most important and interesting fact, I think, is that these basically buckets full of Bitcoin have performed better than Bitcoin itself, which...

Katie Martin (3:51)

I don't get that...

Robert Armstrong (3:52)

.looked at in the abstract looks like black magic.

Katie Martin (3:55)

Yeah. It's like alchemy.

Robert Armstrong (3:57)

Yes.

Katie Martin (3:59)

You turn money into more money by putting it in Bitcoin. Like, it makes very little...

Robert Armstrong (4:06)

Very little. Okay. Well, but there is... You can give at least a mathematical description of what is going on. So MicroStrategy trades, and I'm going to slip into finance jargon here, and I apologize. It trades at a premium to its net asset value. So think of this company as a balance sheet. It has some liabilities like debt. It has some equity, which is what the shareholders put in. And on the other side, it has assets. And the point is that if you take all its assets and you subtract its liabilities, it trades at a multiple of that, like one and a half times the net asset value. So what that means is, if they issue a share, right, they say we're selling stock, which they do a lot. They sell stocks, they sell convertibles, all kinds of equity and semi-equity financing. And then they use that stock to buy a Bitcoin, and then they put the Bitcoin on that balance sheet. The increase in the value of the company is like one and a half times the value of the Bitcoin. Yep.