Cardone Capital crypto adds $72mln Bitcoin – What’s its hybrid strategy?
The real estate firm has allocated about $100M in BTC as part of its inflation hedge and treasury play.
Key Takeaways
What’s behind the real estate firm’s BTC play?
To diversify rental income flow to BTC as a hedge against USD inflation.
Will the BTC bet withstand the short-term headwinds?
That remains to be seen, but analysts are confident of a potential leg higher for BTC.
Florida-based real estate investment firm Cardone Capital has increased its exposure to Bitcoin [BTC]. Its Founder, Grant Cardone, announced that the fund had added $72 million worth of Bitcoin in October and November.
It is suggested that Cardone took advantage of the recent discounted prices. He added that there was a potential $504 million fund if he sells some of his condos to add exposure.
But what’s the real strategy behind Cardone? It has a hybrid system that buys real estate and reinvests a portion of the cash flows (rental income) in BTC for a long-term inflation hedge against the USD.
The firm plans to allocate about 15%-50% of its investment capital to BTC and may sell or borrow against the position to repay investors or fund operations. Sounds familiar? That’s a copy of Michael Saylor’s Strategy playbook.
BTC treasury firms’ headache
With Michael Saylor’s Strategy sitting on billions of dollars of profits via its BTC plan, it’s hard to avoid the temptations of replicating the same in any industry. But the sector is facing short-term headwinds.
Most of the mNAVs (market-to-net-asset-value) traded at a discount, capping the BTC strategy. They can’t raise capital to fund new crypto bids.
To boost the mNAV and market standings, they were forced to sell crypto holdings to fund share buybacks.
Amid the mNAV discount crisis, this key demand line for BTC has slumped in Q4. In fact, the overall institutional demand, including ETFs, declined below miner supply for the first time since March.
Can Cardone’s BTC play pay off?
Reacting to the update, Charles Edwards, Founder of Capriole Investments, said,
“Won’t lie, this was the main metric keeping me bullish the last months while every other asset outperformed Bitcoin.”
It remains to be seen whether new BTC treasury bets will yield the same windfall seen by Saylor’s Strategy amid the headwinds.
Meanwhile, BTC slipped below $ 110,000 again as institutional appetite waned. Some analysts projected an extended consolidation before another leg higher.
