Michael Saylor, executive chairman of MicroStrategy and a leading Bitcoin advocate, recently suggested that major banks like JPMorgan could offer risk-free yield on BTC deposits. However, Saifedean Ammous, the author of The Bitcoin Standard, disagrees, warning that such a model is unsustainable for an asset with a fixed supply like Bitcoin.
The Bitcoin Yield Debate
In a recent podcast, Saylor expressed his belief that Bitcoin could evolve into a form of “perfected capital” that not only stores value but also generates returns through digital banking services. He cited examples of earlier attempts by firms like BlockFi and Celsius, which offered yield on Bitcoin but collapsed due to poor risk management.
Saylor believes the concept can work if executed by large, mainstream banks under government oversight. He argues that financial giants with vast balance sheets could generate a 5% risk-free yield on Bitcoin, backed by the U.S. government. “The best situation would be the U.S. government backing one of the top 10 banks to provide yield on Bitcoin,” Saylor said. This, he claims, would allow BTC holders to earn returns without having to sell their Bitcoin.
Saifedean Ammous: Skeptical of Bitcoin Yield
Saifedean Ammous is far more cautious. He questions the feasibility of generating sustainable yield on Bitcoin, pointing out that earlier attempts by companies like BlockFi and Celsius failed spectacularly. “Ultimately, I don’t think this model works without a lender of last resort,” Ammous said. He fears that, similar to the 2023 banking crisis, any bank offering yield on Bitcoin would require a bailout in the event of insolvency.
Ammous’s main argument is that Bitcoin’s fixed supply makes it impossible to generate sustainable returns without exceeding the available BTC in circulation. “If everyone’s getting 5% on their Bitcoin, eventually there won’t be enough Bitcoin to pay out those returns,” he explained. He believes the pursuit of yield on Bitcoin could lead to another wave of failures similar to Celsius and BlockFi.
Lender of Last Resort: The Core of the Disagreement
Ammous focuses on the dangers of relying on a “lender of last resort” – typically a central bank – to bail out commercial banks that become insolvent. He criticizes this system, as outlined in his book The Bitcoin Standard, for enabling money printing and devaluing the population’s savings. “How can Bitcoin, which has a finite supply, offer yield without eventually running out?” he asks.
On the other hand, Saylor argues that big banks like JPMorgan, backed by the U.S. government, wouldn’t face the same risks as firms like BlockFi and Celsius. He believes the collapse of these firms was due to poor management rather than flaws in the business model. According to Saylor, Bitcoin, when used correctly within the banking system, can generate returns, making it a superior asset to government bonds, which offer 0% yield.
Can Bitcoin Yield Become a Reality?
The debate between Saylor and Ammous highlights the complex and controversial nature of generating yield on BTC deposits. While Saylor envisions a future where traditional banking institutions manage Bitcoin with government oversight, Ammous warns that the fixed supply of Bitcoin and past failures should serve as cautionary tales.
Whether Bitcoin yield will become a reality remains to be seen, but the conversation between these two thought leaders emphasizes the risks and potential rewards of incorporating BTC into traditional financial systems.