Key Takeaways
What’s behind the real estate company’s BTC play?
To diversify rental income into BTC as a hedge against USD inflation.
Will the BTC bet withstand the short-term headwinds?
That remains to be seen, but analysts are confident of a potential upside for BTC.
Florida-based real estate investment firm Cardone Capital has increased its exposure to this sector Bitcoin [BTC]. The founder, Grant Cardone, announced that the fund had added $72 million worth of Bitcoin in October and November.
Source:
It is suggested that Cardone has taken advantage of the recent discounted prices. He added that there would be a potential fund of $504 million if he were to sell some of his apartments to increase exposure.
But what is the real strategy behind Cardone? It has a hybrid system that buys real estate and reinvests part of the cash flows (rental income) into BTC for a long-term inflation hedge against the USD.
The company plans assign about 15%-50% of its investment capital to BTC and can sell or borrow against the position to repay investors or fund operations. Sound familiar? That’s a copy of Michael Saylor’s Strategy Playbook.
Headache from BTC’s treasury companies
With Michael Saylor’s strategy generating billions of dollars in profits through his BTC scheme, it’s hard to avoid the temptation to replicate the same in any sector. But the sector faces short-term headwinds.
Most mNAVs (market-to-net asset value) were trading at a discount, which limits the BTC strategy. They cannot raise capital to finance new crypto bids.
To improve mNAV and market position, they were forced to sell crypto holdings to finance share buybacks.
Amid the mNAV discount crisis, this key demand line for BTC fell in the fourth quarter. In fact, total institutional demand, including ETFs, fell below miner supply for the first time since March.
Can Cardone’s BTC play pay off?
Commenting on the update, Charles Edwards, founder of Capriole Investments, said: said,
“I won’t lie, this was the key metric that kept me optimistic over the past few months, while all other assets outperformed Bitcoin.”
Source: Capriole Investments
It remains to be seen whether new bets on BTC government bonds will deliver the same windfall as Saylor’s strategy amid the headwinds.
Meanwhile, BTC fell back below $110,000 as institutional appetite waned. Some analysts predicted one extensive consolidation before another leg rises.