The Cracks In The Crypto Space

The cracks dividing the once unified crypto community have been opened wider this week following Michael Saylor's inflammatory remarks on self-custody and the backlash that they brought on.

Since Bitcoin spot ETFs began to trade in the U.S. at the start of the year, traditional finance capitalists have jumped onto cryptocurrencies with great enthusiasm.

They have been warmly received by venture capitalist firms, centralized exchanges, and all users who believe that the onboarding of TradiFi leads to a positive impact on their portfolio.

Developers, the geeks, decentralization champions, and self-custody maximalists have been more cautious about the newcomers. Money changes everything, and depending on who you ask, it may not be for the better.

Bitcoin Jesus Sets His Cross On Fire

In an interview for Markets with Madison released on October 20, Michael Saylor, who's often given the title of "Bitcoin Jesus," made some disparaging remarks on self-custody that betray the principles of self-sovereignty upon which cryptocurrencies have been built.

The founder of MicroStrategy defended regulated public entities holding assets over self-custody and suggested that those who mistrust the traditional financial system are "paranoid crypto-anarchists."

"Too big to fail" centralized custodians, the millionaire reasoned, are safer because politicians have stakes in them. He said, "There is no way that all the senators and all the congressmen are going to cease the assets…there is where all their retirement money is invested."

This lit a fire on social media. While Saylor is respected by the crypto community and, due to his company's massive holding of Bitcoin, extremely influential, his good reputation lies in his relentless advocacy for financial freedom through BTC, a stance which his most recent comments contradicted.

Zap's CEO Jack Mallers said: "Calling self-custody 'crypto-anarchism' oversimplifies what Bitcoin accomplishes."

"Michael J. Saylor is now playing into the hands of the government and financial giants like BlackRock, with his statements blindly followed by all his fans," commented Sylvain Saurel of the In Bitcoin We Trust newsletter. 

Ethereum's co-founder Vitalik Buterin also criticized the Wall Street magnat. He called his remarks "batshit insane" and noted that the strategy Saylor was advocating had failed several times before.

The Fire Bells Are Ringing

Faced with a raging storm of criticism, Saylor backtracked. Two days after the interview aired, he posted on X that he supports "the right to self-custody for all," stating that Bitcoin "should welcome everyone."

The damage, however, had been done. Now, the fire bells are ringing.

From pointing fingers at MicroStrategy's founder, the discussion moved to a broader scope: how TradiFi and Big Money are changing the crypto space.

Jameson Lopp, co-founder of self-custody company Casa, said, "The folks who are focused on TradFi adoption of Bitcoin don't care about improving the protocol and scaling the network because they don't care about self-custody."

"Crypto was built to decentralize power, not hand it over to entities like Blackrock or Fidelity. While some see institutional adoption as a way to legitimize and protect the space, it also risks steering the whole movement away from its original ethos," remarked a user on X.

It's Just Smoke, Some Say

While those most loyal to the principles of decentralization have come out opposing Michael Saylor's views, many others have come to defend him.

"Old institutional guys like Larry Fink (and me) wouldn't even be at the table if not for Saylor," commented one user.

"It is possible for public companies to self-custody BTC while respecting compliance, audit, business continuity, and tax requirements all without creating a single point of failure or personal security risks for executives," noted Dhruv Bansal from Unchain Capital. Adding: "Yes, it's hard. Best practices often are."

One Space, Different Perceptions

At the end of the week, Michael Saylor had garnered much more bad press than good. His comments were seen as a betrayal. It now seems that the millionaire will back TradiFi's interests over those of the crypto community.

On the back of his comments, a broader discussion started to unfold about whose interests reign supreme in crypto began to unfold.

The topic has always been around, and it takes many forms.

Recently, there has been an increase in the voices speaking against projects with high fully diluted valuation (FDL) and low circulating supply, which, instead of benefiting their communities, seem only to be deepening the pockets of CEXs and VC firms.

Yet, because traditional finance entered the crypto space bearing gifts—rocketing the price of assets and pouring money into several initiatives—the criticism has been mild so far.

Perhaps the dust will settle again following this week. But perhaps Saylor's PR misstep has ended the TradiFi grace period amongst the "paranoid crypto-anarchists."