MicroStrategy CEO and Bitcoin bull Michael Saylor believes that traditional financial markets are not ready for Bitcoin-backed bonds.
On Tuesday, Saylor told Bloomberg that he would like to see bitcoin-backed bonds one day sold like mortgage-backed securities, but warned that “the market is not quite ready yet. The next best idea would be to get some money from a big Banks get term loans."
MacroStrategy, a subsidiary of MicroStrategy, has entered into a $205 million bitcoin-collateralized loan agreement with Silvergate Bank for the purchase of bitcoin.
— Michael Saylor ⚡️ (@saylor) March 29, 2022
Saylor’s comments came two days after MacroStrategy, MicroStrategy’s subsidiary that specializes in bitcoin, announced a $205 million bitcoin-backed loan to buy more bitcoin. The loan is unique because it marks the first time MicroStrategy has borrowed against its own bitcoin reserves, currently worth about $6 billion, to buy more of the cryptocurrency.
Saylor’s comments follow El Salvador’s recent decision to delay the issuance of a $1 billion bitcoin-backed “Volcano Bond.” According to El Salvador's Finance Minister Alejandro Zelaya, the decision to delay the bond issuance was due to the widespread financial uncertainty in global markets caused by the conflict in Ukraine.
In a potential warning for El Salvador, Saylor said the country’s volcanic bonds are riskier than his firm’s bitcoin-backed loans.
“That’s a hybrid sovereign debt instrument, not a pure bitcoin-treasury investment. It has its own credit risk that’s completely unrelated to the bitcoin risk itself.”
Saylor added that he remains very bullish on the long-term potential of bitcoin-based bonds, even saying that it would be a good idea for a city like New York to use bitcoin as a debt instrument.
“New York could issue $2 billion in debt and buy $2 billion worth of bitcoin — with a yield of 50% or more on bitcoin and a cost of debt of 2% or less.”
Since its first $250 million bitcoin investment in August 2020, MicroStrategy has now accumulated 125,051 bitcoins, equivalent to $5.5 billion at the current price of $44,547. MicroStrategy separately made a series of BTC purchases using the company's cash on hand and the proceeds of a private offering of convertible senior notes to institutional buyers.
Saylor’s move has gradually transformed MicroStrategy into a partially leveraged bitcoin holding company, with MSTR stock closely tied to bitcoin’s price.
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