During the Bloomberg Crypto Summit broadcast, Caitlin Long, CEO and founder of Avanti Bank & Trust, linked MicroStrategy's investments in Bitcoin with the race against hyperinflation after Germany's first world war.
What MicroStrategy did is not much different from what the big German industrialists did when they started to see the currency's devaluation before hyperinflation. I am not predicting that hyperinflation will arrive, I am just saying that there is a historical analogy and we have several technology companies (doing the same), Caitlin said during the program.
To bear the high costs of the First World War still underway, Germany suspended the convertibility of its currency with gold. This measure raised the monetary base of the German Papiermark, the currency in course at the time, to the limit, causing an explosive increase in prices.Man sweeping paper money on the street during hyperinflation in postwar Germany. Source: Mises Brasil.To protect against currency devaluation, many people have turned to gold as an asset against inflation. Exactly a century later, the world is experiencing a further significant increase in the monetary bases of fiat currencies, which have long since lost their parity with gold. But now, the best protection against inflation may no longer be the yellow metal, which millennia is synonymous with wealth, but its digital version, Bitcoin.
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The King of Inflation
Hugo Stinnes, a famous German industrialist, received the title of “King of Inflation” after taking advantage of all his money and access to credit to make large investments in gold in the pre-hyperinflation period. In 1923 Time magazine called Hugo 'The New Emperor of Germany'. The strategy of Michael Saylor, CEO of MicroStrategy, the company that made the purchase of more than 90 thousand bitcoins, is basically the same as that of Hugo Stinnes, unlike it is only in the type of hedge chosen.
Well, the story here is due to the rapid expansion of money supply by central banks, the cost of capital has tripled from 5% to 15% last year, and if we look at the next four years, bond coupons and EPS growth rates – earnings per share – will need to overcome this obstacle to preserve wealth, said Michael Saylor.
The big question here is whether we will actually enter a period of very high inflation. In this scenario, gold, bitcoin, silver and other scarce assets tend to overvalu in relation to traditional currencies. Are you preparing for a scenario of hyperinflation? Leave your opinion in the comments section below. Read more: Coinbase reveals its purchased Bitcoin equity since 2012