Peter Schiff Criticizes MicroStrategy's Strategy of Buying Bitcoin with Debt

• Schiff criticizes Bitcoin for not generating income like real estate.
• Saylor defends MicroStrategy's debt-based strategy.
• Debate intensifies risks and benefits of cryptocurrencies.

Peter Schiff, a well-known cryptocurrency critic, has once again criticized MicroStrategy co-founder Michael Saylor for comparing the company’s debt-based Bitcoin buying strategy to investing in Manhattan real estate. In a post on the X network, Schiff pointed out flaws in Saylor’s analogy. “Real estate generates income, which can be used to pay off debt. Bitcoin does not generate any income to cover interest or principal payments,” he said.

It's wrong for @saylor to compare his leveraged buying of # Bitcoin to investors borrowing money to purchase Manhattan real estate. Real estate generates rents, which can be used to service and repay debt. Bitcoin doesn't generate any income to make interest or principal payments.

- Peter Schiff (@PeterSchiff) December 17, 2024

The statement sparked reactions in the financial market. Spencer Hakimian, founder of Tolou Capital Management, responded to Schiff's comment, offering a counterpoint. According to Hakimian, unlike real estate, which has maintenance costs, Bitcoin does not require recurring expenses, making it a simpler alternative for asset management.

Schiff countered by noting that rental income from real estate often exceeds its costs, reinforcing his point that real estate is a more reliable source of income generation when compared to cryptocurrencies.

The discussion arose after Saylor argued that, just as real estate developers resort to debt to expand their operations when prices rise, MicroStrategy uses Bitcoin returns to buy even more of the cryptocurrency.

However, Schiff was quick to warn about the risks of the strategy. He argues that a sharp drop in the price of Bitcoin could hurt MicroStrategy’s ability to meet its financial commitments, potentially forcing the company to liquidate some of its holdings. This concern is shared by analysts like Willy Woo, who point to the risks associated with the company’s convertible notes.

At the time of publication, the price of Bitcoin was quoted at US$99.092,84 with a drop of 5.6% in the last 24 hours.

MicroStrategy currently holds over 439.000 BTC, acquired for a total cost of $4,5 billion. This aggressive acquisition strategy has put the company at the center of the debate over the advantages and disadvantages of using cryptocurrencies as a primary strategic asset.