MicroStrategy Inc founder Michael Saylor believes the market is not ready for bitcoin (BTC)-backed bonds and, warning of this, sends a message to El Salvador President Nayib Bukele.
As planned since November of last year, El Salvador aims to issue bitcoin-based bonds for an amount greater than USD 1,000 million.
In Bukele’s plans is get out of the financial hole you’re in and for this it will use the funds raised by state bitcoin bonds to increase the nation’s bitcoin holdings, which are already in the order of 1800 BTC.
The collected money it will also be used to finance the construction of the Bitcoin Citya city that will be powered by geothermal electrical energy generated from the Tecapa volcano and later from the Conchagua volcano, as reported by CriptoNoticias.
However, for Michael Saylor It doesn’t seem like a good idea for El Salvador to issue 10-year bitcoin-based bonds and an interest rate of 6.5% per year.
These bonds are a hybrid sovereign debt instrument rather than a pure bitcoin treasury game. That has its own credit risk and has nothing to do with the risk of BTC itself.
Michael Saylor, founder of MicroStrategy Inc.
From your point of view, a better idea would be for El Salvador to request a term loan from a major bank Instead of relying on retail investors to buy bitcoin-based government bonds, he said in an interview with Bloomberg.
What Saylor seems to be suggesting is that Bukele drop his volcano bond offer and instead copy MicroStrategy’s strategy.
A couple of days ago, the software company reported what used his bitcoin fund as collateral to get a 3-year loan worth $205 million through Silvergate Bank, a US bank that is friendly to cryptocurrencies.
Currently MicroStrategy has in his treasury 125,051 BTC, valued at nearly $6 billion today.
With the loan you just got, MicroStrategy is showcasing a new formula for institutions to experiment with other options available to get into debt without parting with the bitcoins they have in their balance.
What about El Salvador’s bitcoin bonds?
What Michael Saylor pointed out regarding El Salvador’s bitcoin bonds seems to be consistent with a publication recent of fortune in which he points out that the world is now less optimistic about volcano bonds.
“Institutional investors are skeptical,” says the note. He then observes the contradictions between the Minister of Finance of El Salvador, Alejandro Zelaya, and Paolo Ardoino, the CTO of Bitfinex, the exchange that will serve as a platform for the launch of the volcano bonds.
At a meeting in Paris earlier this March, Zelaya told institutional investors that bitcoin bonds had attracted “a demand of USD 1,500 million”. However, in a recent interview, Ardoino said that there was about $500 million worth of user interest on El Salvador’s state bonds.
The figure mentioned by Ardoino barely represents around a third of Zelaya’s estimate, although the one from the Bitfinex CTO referred only to clients of the exchange.
The truth is that the debut of bitcoin bonds was scheduled for the third week of March, but to date, the investment instrument has not yet been launchedsuggesting that caution has prevailed.
Zelaya has said that they wait for market conditions to improve and it is speculated that the launch could take place in September.
In any case, there are enough signs to understand that El Salvador is making efforts to get rid of the dollar and the financial system that keeps it mired in debt. His bet is around bitcoin, although it must be taken into account that, after all, it is the first country in the world to adopt the pioneering cryptocurrency.
What’s more, believe in it enough to issue BTC-based sovereign debt to gain financial momentumto the point of being able to finance the construction of the first bitcoin city in the world.
