Coinbase Considered, Decided Against Michael Saylor’s Bitcoin Buying Strategy

(Bloomberg) — Coinbase Global Inc. was tempted in the past to go all in on the Bitcoin buying strategy popularized by Michael Saylor but considered the scheme too risky. 

“There were definitely moments over the last 12 years where we thought, man, should we put 80% of our balance sheet into crypto — into Bitcoin specifically,” Brian Armstrong, co—founder and chief executive officer of the largest US crypto exchange, said during a video talk on the X social network on Friday.

Coinbase ultimately decided against the gambit as it risked damaging the firm’s cash position as a startup, and could have potentially “killed” the San Francisco-based company, Armstrong said. “We made a conscious choice about risk.”   

That said, Coinbase purchased $153 million of crypto — mostly Bitcoin — in the first quarter for its investment portfolio, according to the company’s latest shareholder letter. It holds $1.3 billion worth of cryptocurrencies — mostly Bitcoin — as investments, according to the letter released Thursday. 

Coinbase Chief Financial Officer Alesia Haas, who also participated in the X discussion, said the company didn’t want to be seen as competing against its customers, who invest in crypto. 

“Rest assured, we are not stopping there,” Haas said, about growing the company’s crypto holdings.

A slew of companies have sought as of late to emulate Saylor’s blueprint of funding Bitcoin purchases with stock and debt sales on a bet that the cryptocurrency’s rapid appreciation will bolster the value of the company’s shares. The former MicroStrategy’s shares have surged more than 3,000% since Strategy, which holds about $54 billion of the cryptocurrency, began buying Bitcoin in 2020. 

Bitcoin miners, a flurry of obscure small-cap companies and public firms newly formed by crypto heavyweights are offering anything from convertible bonds to preferred stocks, giving different flavors of Bitcoin exposure to investors. 

In recent weeks, an affiliate of Cantor Fitzgerald LP said it is working with stablecoin issuer Tether Holdings SA and SoftBank Group to launch Twenty One Capital Inc., a company that emulates Strategy’s business model. A subsidiary of Strive Enterprises Inc. co-founded by Vivek Ramaswamy is merging with Nasdaq-listed Asset Entities Inc. to form a Bitcoin treasury company. 

And on Friday, the shares of Next Technology Holding Inc. rose more than 600% in US trading, triggering volatility halts, after the Beijing-based software company disclosed that it had increased its Bitcoin holdings to 5,833 from 833. 

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