🟧 BTC vs MSTR 🔴 Accretive Dilution Fundamentals | Hashpower Academy

Video Transcript:

Accretive dilution. Something that traditional finance uses as an explanation for doing merger and acquisition of companies to increase the amount of earnings per share for your shareholders. But Micro Strategy, Michael Sailor has very much uh brought new life to this explanation of issuing more shares at one price, the market price, and buying more Bitcoin with that to drive the amount of Bitcoin per share up over time and drive long-term value into his company. Now, interestingly enough, Bitcoin in of itself has its own form of accretive dilution. This is the word used associated to the dilution of shareholders to give them accreatively more value. Now when it comes to Bitcoin’s version of accreative dilution, it works in a bit of a different way. There is continually more Bitcoin miners joining the network fighting for one of the 144 slices of the Bitcoin cake available per day, otherwise known as the 455 Bitcoin distributed in 144 blocks per day. Now, when the price goes up, there’s even more incentive for more miners to plug in online and capture this revenue, which increases it from about 144 a day to an even greater level. And so what the network does is it has a difficulty adjustment which reconstrains and raises difficulty to make sure there is only about 144 blocks being found per day aka one block roughly every 10 minutes. And so what you’re having is this effect of more miners earning from this 455 bitcoin. So they are effectively diluting themselves. But the accretive part is this that if 10% more hash rate comes online, it represents potentially 10% more energy being consumed in the network as well. So the electron value of Bitcoin has gone up another 2,000 megaww in this 10% increase example. So accretively, the Bitcoin has gained more value being repriced against more energy. The value mechanism of Bitcoin is its production cost and its exchange rate with electricity because the exchange rate goes both ways. It’s not just consume energy to produce Bitcoin, but potentially selling energy to buy Bitcoin. Now on the micro strategy side of things, it gets a little bit interesting because what I’m explaining here is that Bitcoin has a production flaw and that represents its own form of value mechanism versus the Bitcoin to dollar price. Now, if the Bitcoin to dollar price is recognized as the value of Micro Strategy shares, it essentially means that the Bitcoin per kilowatt hour production floor average, let’s say it’s 50%. It’s actually less, but Bitcoin per kilowatt hour. And if we applied it to this price chart, that’s per Micro Strategy share. So what if people viewed Micro Strategy shares not for their underlying Bitcoin per share, but actually the value and exchange rate of Bitcoin to electricity being a true fundamental value of these shares because it’s how much energy you can buy with your Bitcoin. Uhund 27.5. So this is a way of perceiving essentially the underlying value of Bitcoin which is recognized in Micro Strategy shares um as the price of Bitcoin as the shares value. I’m giving you another fundamental layer which is essentially the energy value of these shares. Now the reason why I would use this as a new perspective on looking at the sort of accretive dilution nature is that when the bull market takes off if the production floor for Bitcoin is about 60,000 and the price is hovering 20,000 the price was to double production floor would still not be able to catch up. So it would be now 25%. So the way that people treat the difference between the share prices and Bitcoin per share and the gap between these two, if the price of the shares gets too high, essentially the shares are trading at a massive premium to their underlying Bitcoin value that you can assimulate the comparison between the Bitcoin price and yes, I’ve got it in a chart for Micro Strategy pricing, but you can you can work with me here. Bitcoin to dollar and Bitcoin to kilowatt hour as a value mechanism that truly in the peak of the bull market the ability for these shares to drop is people observing that the share price could drop one to one par is the worst case scenario but Bitcoin can drop to one to one par of its production floor so potentially Bitcoin’s production cost could be a true value metric underneath the price of Bitcoin. underneath the price of Micro Strategy shares. So, it’s just another interesting way to view the production cost of Bitcoin as a value exchange rate from the physical world because with finance being focused on finance, they can get a little bit disconnected from the reality of the world sometimes aka 2008. So yes, an interesting other way of viewing Bitcoin’s accretive dilution properties of the miners diluting their own revenue, but their revenue being priced against their energy use and that being the assigned value mechanism of their exchange rate of electricity to produce Bitcoin that can go both ways in our future world of building Bitcoin electricity grids where all the different homes can trade energy and money interchangeably through compute power. Thank you for listening. I hope you enjoyed this other perspective. There is obviously going to be multipliers that you can apply to these different levels and interesting ways to model out the long-term value of these companies along with all the other Bitcoin Treasury stocks that will come. See you next time. Goodbye.