Everyone I speak to has a different view on Bitcoin and digital assets. Some are bullish. Some are sceptical. Some flat-out dismissive. And that’s healthy. When smart people disagree, it forces you to sharpen your thinking. It’s uncomfortable at times, but like a scientist, you don’t learn by confirming what you already believe; you learn by testing it, even when the truth can sometimes be painful.
Benjamin Graham once said, “In the short run, markets are voting machines. In the long run, they’re weighing machines.”
That frequently quoted line perfectly encapsulates the inherent paradox of risk. In the heat of the moment, excitement prevails among the crowd. Financial markets, often plagued by short memories, tend to repeat their errors.
Each new generation, brimming with confidence and unaware of past failures, perceives old dangers as new opportunities. This pattern of selective memory tempts us to disregard history until a harsh market lesson unfolds. Only then does the “weighing machine” ultimately reveal the true worth of our gambles.
Strangely, it is not always the cautious or the clever who win. Sometimes it’s the people who are bold enough or reckless enough to stake everything on a single conviction.
The Allure of the Big Bet
Risk often begins with a story, not a spreadsheet. In 2020, amid a pandemic and money-printing frenzy, Michael Saylor, Strategy’s founder, declared cash to be “melting ice” and Bitcoin the lifeboat. What began as a hedge quickly became an obsession; the company now holds over 629,000 BTC, about 3% of all Bitcoin in existence, worth $72.4 billion at today’s price, enough to buy the U.S energy company Constellation Energy Corporation.
Its playbook is stunningly simple:
- Raise billions in debt or equity.
- Buy Bitcoin with it.
- Hold forever.
To many investors, this looked brilliant. The stock has compounded at 90% annually over the last five years. Strategy became a regulated “Bitcoin proxy” for institutions that couldn’t or wouldn’t buy Bitcoin directly.
History is full of such all-or-nothing wagers. Ferdinand Magellan convinced Spain to fund a suicidal voyage around the globe.
John D. Rockefeller bet his future on refining oil, not drilling it.
Elon Musk had pushed Tesla to the brink with a desperate loan.
The allure is obvious. Stake everything, prove the world wrong, and you might be remembered forever. Of course, legends and fools are separated only by whether the coin lands heads or tails.
The Psychology of Risk: FOMO and the Greater Fool
Here’s the strange part: investors often pay more than the value of Strategy’s Bitcoin holdings just for the privilege of owning its stock. At times, they’ve paid $2 or $3 for every $1 of Bitcoin it holds.
That’s not finance. That’s psychology.
Behavioural economics has long shown that people would rather lose money with the crowd than risk missing out alone. Fear of missing out (FOMO) is contagious. During the Dutch tulip mania in the 17th century, tulip bulbs were sold for the equivalent of house prices. Similarly, in the dot-com bubble of the 1990s, companies saw their market capitalisation double simply by appending “.com” to their names.
Strategy is today’s version of the same phenomenon. This phenomenon benefits early shareholders as new investors join, despite these latecomers paying inflated prices. The music continues to play as long as Bitcoin rises and new money flows in.
But risk, at its core, is about knowing that someone will be left standing when the music stops.
Three Kinds of Smart (and Their Blind Spots)
One reason risk is so slippery is that there are different “kinds of smart”:
- The Engineer’s Smart. Saylor built a perpetual-motion machine out of corporate finance. By issuing stock and bonds at a premium, he buys more Bitcoin and reports higher “Bitcoin per share.” It’s financial engineering at scale.
- The Gambler’s Smart. Like a poker player going all-in, conviction itself becomes a weapon. By declaring Bitcoin his only bet, Saylor created a cult-like following. Sometimes the boldest bluff reshapes the table.
- The Historian’s Smart. History reminds us that markets eventually “weigh” fundamentals. Strategy’s core software business grows barely 3% a year and is worth maybe $560 million and $72.4 billion worth of Bitcoin. Yet the stock trades above $100 billion. Sooner or later, the weighing machine will ask tough questions.
The catch is that being smart in one dimension doesn’t guarantee survival in another, especially if the product is purely driven by sentiments and its intrinsic value is unknowable.
The Tangibility Problem
Risk feels different when the thing at stake is tangible. A farmer grows crops. A factory makes goods. Companies like Microsoft sell software; their products are embedded in our daily lives. A ship brings back spices. Even a painting can hang on a wall.
Bitcoin, by contrast, doesn’t “do” anything. It is a castle in the sky, real enough to inspire devotion, impossible to weigh on earthly scales.
It has no cash flows, no productive use, and no harvest. Its value rests entirely on what someone else will pay for it tomorrow. That doesn’t make it worthless after all; gold has kept its allure for millennia, but it makes valuation impossible in the traditional sense.
This creates what you might call the tangibility problem. Companies like Strategy trade more like art dealers than manufacturers or technology. Their balance sheets rise and fall with sentiment, not output. That’s exhilarating on the way up, terrifying on the way down.
It’s not the first time. In the South Sea Bubble of 1720, a company raised money “for carrying on an undertaking of great advantage, but nobody knew what it was.” Investors lined up anyway.
At least Strategy is clear, its undertaking is buying Bitcoin. Whether that’s more honest or more absurd depends on your perspective.
The Cult of Conviction
Every great risk story eventually morphs into a story about belief. Strategy is no exception. Michael Saylor speaks about Bitcoin with evangelical zeal. Investors praise his “diamond hands.” Twitter threads hail him as a kind of digital-age prophet.
Conviction has power. It can carry companies through downturns, keep teams united, and attract capital. Jeff Bezos had it when he poured Amazon’s early profits into relentless expansion. Churchill had it when he told Britain to never surrender.
But conviction can also blur into delusion. Belief sustains risk-takers until it blinds them to the fact that the odds haven’t changed.
Conclusion
Risk is stitched into ambition. It’s the reason explorers set sail, entrepreneurs quit safe jobs and investors buy assets that don’t make sense on paper. What makes risk timeless isn’t that humans chase it—it’s that humans tell stories to justify it.
Some of those stories end in empires. Some end in ashes. The trouble is, you rarely know which story you’re in until much later.
Strategy Inc. may one day be remembered as a visionary bet on digital gold or as a corporate cautionary tale of financial alchemy. Either way, its saga is a reminder that risk is less about predicting the future than choosing the story you’re willing to live with.
Asset prices in 2025 are high relative to fundamentals, driven more by optimism and psychology than earnings growth. AI may justify premium valuations for a handful of companies, but broadly, I believe investors should position defensively. That means reducing aggressive holdings such as MicroStrategy and adding defensive names like Novo Nordisk.
Awet Ghirmay, Head of Investment Research
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The value of investments and the income derived from them may fall as well as rise. You may not get back what you invest. This communication is for general information only and is not intended to be individual advice. You are recommended to seek competent professional advice before taking any action. All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs practice. Levels and bases of tax relief are subject to change. This blog is based on my own observations and opinions.
