Peter Schiff warns that Microstrategy’s $42 billion plan to increase its bitcoin holdings, financed by debt and equity, risks creating a dangerous liquidity trap. He referred to Michael Saylor as "the Egg Man."
Is a Liquidity Trap Emerging? Schiff's Alarming Message for Microstrategy's Bold Plan
Economist and gold advocate Peter Schiff criticized Microstrategy CEO Michael Saylor's latest bitcoin acquisition strategy, likening it to an old investment joke about overextending in the market. In a post on social media platform X on Thursday, Schiff wrote:
Michael Saylor is the Egg Man. His latest announcement is that MSTR will spend an additional $42 billion to buy bitcoin, financed by issuing $21 billion in debt and $21 billion in equity over the next three years. This reminds me of a joke I heard a long time ago.
Schiff used the story of a fictional trader who sensed a promising market, buying increasing amounts of egg futures as prices rose. This trader speculated on egg futures, initially buying 100 contracts at 25 cents each. After the price rose to 35 cents, he bought another 1,000 contracts.
As prices continued to soar — reaching 50, then 65, and finally 95 cents per contract — he increasingly bought more, eventually owning millions of contracts. When the price hit $1.75, he decided to sell 2 million contracts. His broker replied, "Sell to whom, you're the egg seller!"
The economist's analogy highlights a potential liquidity trap that he believes could affect Saylor and his company, Microstrategy, if the price of bitcoin eventually declines or stabilizes.
Schiff, the president of the precious metals trading company SchiffGold, frequently criticizes bitcoin and promotes gold. Last week, he noted that while assets linked to a potential Trump victory were rising in price, bitcoin was not, and questioned, "If Trump’s victory is a bullish trend for bitcoin, why isn't it rising in line with Trump's odds?" The gold advocate suggested that speculators may have invested and warned of a "Trump sell-off."
He also warned that the Federal Reserve risks repeating past policy mistakes with the anticipated interest rate cuts and the potential return to quantitative easing (QE). According to Schiff, this approach will further drive up debt, push consumer prices higher, weaken the dollar, and ignite inflation.