‘DeFis, regulatory uncertainty’: Billionaire Michael J Saylor explains crypto crash

Saylor gave two reasons for the current crypto market crash: “I think that there’s a lot of dynamics here. If you look at the entire crypto ecosystem, you have a set of regulatory uncertainty, especially regulatory uncertainty around stablecoins and crypto tokens and whether or not they’re securities. And that creates a little bit of anxiety.”

He also spoke about how the emergence of Decentralised Finance (DeFi) exchanges made cryptocurrency more volatile. For the uninitiated, DeFi is an alternative finance ecosystem where consumers transfer, trade, borrow and lend cryptocurrency, independently of traditional financial institutions and the regulatory structures that have been built around banking. The DeFi movement aims to “disintermediate” finance, using computer code to eliminate the need for trust and middlemen from transactions.

“You have a lot of leverage offshore. You have a lot of crypto exchanges that can trade with up to 20x leverage. And those crypto exchanges have many, many tokens that are cross-collateralized. Between them and the decentralized finance [DeFi] exchanges, you can get much higher than 20x leverage. So that’s the second source of volatility.“

Saylor believes the current market conditions provide “a great entry point for crypto-curious institutional investors who have so far been sitting on the sideline. “I feel like it’s consolidating at this level. This is a great entry point for institutional investors. I talk to high net-worth individuals, family offices, public company executives, private company owners and they watched Bitcoin run up in 2021. And there are a lot of people that would be afraid to own it if it was going up 400 per cent a year.”

Meanwhile, earlier in August, MicroStrategy announced  that it had purchased $250 million worth of Bitcoins to use as a “primary treasury reserve asset”. The company has continued to accumulate Bitcoin and its CEO has become one of Bitcoin’s most vocal advocates. It is worth noting that MicroStrategy currently owns 1,24,391 Bitcoins, which is worth approximately $4.85 billion.