“Not quite ready” – Michael Saylor, CEO of MicroStrategy, stated that existing financial markets are not equipped for Bitcoin-backed bonds.
Michael Saylor, CEO of MicroStrategy and a self-proclaimed Bitcoin bull, feels that existing financial markets are not yet prepared for Bitcoin-backed bonds.
Saylor told Bloomberg on Tuesday that he would want to see the day when Bitcoin-backed bonds be marketed in the same way that mortgage-backed securities are, but cautioned that “the market is not quite ready for that yet.” The next best option was to obtain a term loan from a large bank.”
— Michael Saylor⚡️ (@saylor) March 29, 2022
The remarks come two days after MicroStrategy (MSTR) disclosed that its Bitcoin-focused business MacroStrategy had secured a $205 million Bitcoin-collateralized loan to purchase additional Bitcoin. This loan was noteworthy in that it was the first time MicroStrategy borrowed against its own Bitcoin assets — which are currently valued at about $6 billion — to purchase further Bitcoin.
Saylor’s comments come on the heels of El Salvador’s recent decision to postpone the March 23rd issue of its $1 billion Bitcoin-backed “Volcano Bond.” According to El Salvador’s Finance Minister Alejandro Zelaya, the decision to postpone the bond was made due to global financial market uncertainties caused by the Ukraine war.
As a possible cautionary note to El Salvador, Saylor stated that the country’s Volcano Bond was slightly riskier than his company’s Bitcoin-collateralized loan.
“Instead of a pure Bitcoin-treasury play, this is a hybrid sovereign debt product.” This has its own credit risk and is unrelated to the Bitcoin risk at all.”
Saylor added that he is quite bullish on the long-term prospects for Bitcoin-based bonds, even suggesting that cities such as New York should consider using Bitcoin as a financial instrument.
“New York City can issue $2 billion in debt and purchase $2 billion in Bitcoin – the Bitcoin yields 50% or more, while the loan costs 2% or less.”
Since investing $250 million in Bitcoin in August 2020, MicroStrategy has collected a sizable 125,051 BTC — equivalent to $5.5 billion at the current price of $44,547. MicroStrategy conducted a number of independent BTC purchases utilising cash on hand and revenues from private issuance of convertible senior notes to institutional buyers.
MicroStrategy has steadily converted into a somewhat leveraged Bitcoin holdings company as a result of Saylor’s actions, with MSTR shares closely correlated with the price of Bitcoin.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.