The CEO of MicroStrategy and bitcoin (BTC) permanent, Michael Saylor believes that traditional financial markets are not quite ready for Bitcoin-backed bonds.
Saylor told Bloomberg on Tuesday that would love to see the day when bitcoin-backed bonds sell like mortgage-backed securities, but warned “the market isn’t quite ready for that right now. The next best idea would be a term loan from a major bank.”
MacroStrategy, a subsidiary of @MicroStrategyhas closed a $205 million bitcoin-collateralized loan with Silvergate Bank to purchase #bitcoin. $MSTR $YEShttps://t.co/QYw2ZgeE3U
—Michael Saylor⚡️ (@saylor) March 29, 2022
MacroStrategy, a subsidiary of @MicroStrategy, has closed a $205 million collateralized bitcoin loan with Silvergate Bank to purchase bitcoin. $MSTR $SIhttps://t.co/QYw2ZgeE3U
The statements come two days after MacroStrategy, MicroStrategy’s bitcoin affiliate, announced that it had taken out a $205 million BTC secured loan to buy even more Bitcoin. This loan was uniqueas it marked the first time MicroStrategy had borrowed against its own bitcoin holdings — currently valued at roughly $6 billion — to buy more of the cryptocurrency.
Saylor’s comments also follow El Salvador’s recent decision to postpone the issuance of its $1 billion BTC-backed “Volcano Bond.” on March 23. According to the Minister of Finance of El Salvador, Alejandro Zelaya, the decision to delay the bond was due to the general financial uncertainty in the global market driven by the conflict in Ukraine.
In a possible warning to El Salvador, Saylor said the country’s Volcano Bond was somewhat riskier than his company’s bitcoin-secured loan..
“That is a hybrid sovereign debt instrument as opposed to a pure bitcoin-treasure game. That has its own credit risk and has nothing to do with the risk of bitcoin itself entirely.”
Saylor added that he remains extremely bullish on the long-term potential of bitcoin-based bonds.going so far as to say that it would be a good idea for cities like New York to use bitcoin as a debt instrument.
“New York can issue $2 billion of debt and buy $2 billion of bitcoin: bitcoin is yielding 50% or more, debt is costing 2% or less.”
Since its initial investment of $250 million in BTC in August 2020, MicroStrategy has now amassed a substantial 125,051 BTC, which at the current price of $44,547, equates to $5.5 billion. MicroStrategy has made a number of separate BTC purchases using the company’s cash on hand, as well as proceeds from sales of senior convertible bonds in private offerings to institutional buyers..
Saylor’s actions have gradually transformed MicroStrategy into a partially leveraged bitcoin holding company, with actions closely correlated to the price of bitcoin..
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