Michael Saylor is a BTC crack addict, Coinbase prefers proxy BTC

Michael Saylor just bought over a billion dollars worth of BTC while the Coinbase (NASDAQ: COIN) exchange embraces a proxy version of BTC.

On September 13, Saylor’s MicroStrategy (NASDAQ: MSTR) announced that it had acquired an additional 18,300 BTC tokens between August 6 and September 12, bringing the company’s total BTC haul to 244,800 tokens. It’s the largest such purchase the firm has reported in three years and cost the company over $1.1 billion.

The 18,300 tokens were acquired at an average price of $60,408, about $2,500 higher than BTC’s price at the time this was written, meaning Saylor’s latest purchase is already roughly $46 million in the red. But the average purchase price of MicroStrategy’s total token stash is $38,585, meaning Saylor’s still solidly in the black—for the time being, at least (but that average keeps creeping higher).

Following his conversion from BTC skeptic, Saylor embarked on his BTC buying bonanza in August 2020 and has steadily built up his company’s stash ever since. Saylor, who holds a controlling stake in his company, has primarily funded this shopping spree by issuing new debt and diluting his company’s shares.

As if on cue, MicroStrategy announced on September 16 that it planned to issue another $700 million in new debt, $500 million of which will be used to redeem old debt, while the balance will be used to buy billboards around the country depicting Saylor as Lloyd from Dumb and Dumber. Just kidding, it will be used to acquire more BTC. (He can’t stop, otherwise, BTC’s fiat price will keep falling.)

During MicroStrategy’s most recent earnings report, Saylor claimed his company was a better play than the BTC-based exchange-traded funds (ETF), partly due to MSTR’s lack of management fees. But his company’s former reason for being—its data analytics software business—saw revenue fall 7.4%, contributing to a net loss for the quarter of $102.6 million. 

Saylor, who appears to spend most of his day tweeting AI-generated memes of himself in various heroic guises promoting BTC, recently predicted that BTC would reach a price of $13 million by 2045. Saylor also described individuals making leverage trades on the Binance exchange as “degenerate crypto traders,” to which the rest of the world might remark: physician, heal thyself.

In January, scammers used an AI-generated Saylor deepfake to lure unsuspecting ‘investors’ into sending their BTC to an address, promising that Saylor would send them back twice as much. Saylor said his team “takes down about 80 fake AI-generated YouTube videos every day, but the scammers keep launching more.”

That could be because Saylor’s BTC advocacy is so comically OTT that it’s hard to discern scams from the real thing. And while Saylor was quick to issue a warning of the scam, his tweet reposted the QR code used by the scammers, likely contributing to the list of victims who fell for this duplicity.

Speaking of scams, Saylor and MicroStrategy paid $40 million in June to resolve his tax avoidance charges in the District of Columbia. The payment, which exceeded the amount of Saylor’s tax avoidance by $15 million, represented the largest income tax fraud recovery in D.C. history.

The District’s Attorney General Brian Schwalb said Saylor “openly bragged about his tax-evasion scheme, encouraging his friends to follow his example, and contending that anyone who paid taxes to the District was stupid.” As Forrest Gump famously observed, stupid is as stupid does.

Meanwhile, we’ve just been sent secret undercover footage of Saylor looking to buy more of his sweet, sweet poison.

Wrap it up

On September 12, Coinbase announced the launch of cbBTC, aka Coinbase Wrapped BTC. This ‘wrapped’ version of BTC will exist on Ethereum and Base, the Ethereum Layer 2 (L2) network that Coinbase launched last year. The new ERC-20 token is currently available in the U.K., European Economic Area (EEA) states, Australia, Brazil, and all U.S. states except New York.

‘Wrapped’ versions of BTC first appeared in 2019 in the form of WBTC, the product of digital asset custodian BitGo. The idea was to allow BTC holders to use their tokens in decentralized finance (DeFi) projects on Ethereum, as the bandwidth-constrained BTC lacks the ability to natively handle smart contracts.

WBTC already had a presence on Base, but Coinbase saw an opportunity to carve out its own niche when BitGo launched an ill-advised “strategic partnership” with BiT Global, a Hong Kong-based firm supported by Justin Sun, the controversial founder of the equally controversial Tron blockchain.

Basically, nobody trusts Sun, so the thought of him being part of BitGo’s new “multi-jurisdictional and multi-institutional custody” of the BTC backing the WBTC tokens didn’t sit well with WBTC holders.

Coinbase will handle custody of the BTC backing cbBTC, much like the exchange does for the tokens backing most of the BTC-based ETFs. The thinking is, if it’s good enough for BlackRock and Fidelity, it’s good enough for Pete from Peoria.

But it’s not good enough for Sun, apparently. Sun tweeted his objections the day cbBTC launched, saying the new token “lacks Proof of Reserve, no audits, and can freeze anyone’s balance anytime. Essentially, it’s just ‘trust me.’ Any U.S. government subpoena could seize all your BTC. There’s no better representation of central bank Bitcoin than this. It’s a dark day for BTC.”

Reaction to this tweet was swift, with many dismissing Sun’s protestations as trying to hobble a competitor. Others pointed out that Sun’s stUSDT (staked versions of Tether’s USDT stablecoin) lacked many of the same safeguards, which could also be said for BTC on Tron, Sun’s TUSD stablecoin, etc.

Regardless, the fact that DeFi has largely turned into a hive of rug-pullers and poorly written smart contracts probably means Coinbase customers who convert their BTC to cbBTC will likely regret diving into this fetid swamp.

Base’s success threatens Ethereum mothership

In the 13 months since its launch, Base already boasts the highest transaction volume of all Ethereum L2’s, with nearly 4x the volume of runner-up Arbitrum (although Arbitrum continues to lead in total value locked).

This is partly due to Base’s reputation as THE place to launch a memecoin. Since March 1, over 1.5 million memecoins have launched on Base, while the main Ethereum network accounted for only around 1/10th that figure. Of course, all but a tiny handful of these utility-free tokens were effectively worthless an hour after their debut, but hey, what price for progress?

Memecoin ubiquity isn’t the only metric by which Base is now outperforming Ethereum, the latter having seen its revenue fall by 99% since March 2024. That was the month the network’s Dencun upgrade—significantly lowering L2 transaction fees—was implemented. Ethereum transaction fees went from $35.5 million on March 4 to just $566,000 on August 31.

This has serious implications for Ethereum’s security, which relies on the individuals/entities staking their ETH tokens to participate in the network’s proof-of-stake consensus mechanism. With transaction volume plummeting, daily staking revenue is hitting lows not seen in six months. That could convince many solo stakers to pack it in and find something more productive to do with their ETH, which could cause further centralization of network security.

Small wonder, then, that Ethereum co-founder Vitalik Buterin recently declared war (of sorts) on L2s that failed to adequately decentralize their activities. Buterin tweeted that, as of 2025, he will no longer publicly discuss any L2s that have yet to ditch their “full training wheels” and reach at least the middle stage of a three-stage process. 

Base is still firmly rooted in the lowest stage of this process, with Coinbase still serving as Base’s sole ‘sequencer’ (transaction processor). While Coinbase continues to claim that it will permit rival processors “over time,” there’s still no schedule for when this magical day of free market competition might arrive.

The sole responsibility for approving financial transactions, along with the growing importance of Base fees to Coinbase’s bottom line, has some Coinbase critics warning that the exchange could soon face a visit from the U.S. Department of Justice. After all, “a centralized money transmitter network operating without fulfilling [know your customer/anti-money laundering] duties” doesn’t come along every day.

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