MicroStrategy Goes All-in With A $205M Loan To Buy Bitcoin… Again

March 30, 2022 2:40 pm Comments

MicroStrategy is a company that has built a reputation for itself by including a sizeable amount of the company’s financial portfolio into Bitcoin.

The firm has built a massive portfolio in the past few years as its decision to allocate capital to digital assets has turned out to work extremely well.

After the decline in the markets and Bitcoin since the start of 2022, it seems that investors are still bullish on the overall direction of Bitcoin and the markets as the company is looking to take an even larger position.

The difference this time is that the firm will use a $205M Bitcoin-backed loan from Silvergate Bank to buy even more Bitcoin indicating the company’s firm outlook on the digital asset’s future.

Bitcoin.com reports:

The Nasdaq-listed pro-bitcoin software company Microstrategy announced Tuesday that one of its subsidiaries has obtained a bitcoin-backed loan to purchase additional BTC.

Microstrategy CEO Michael Saylor tweeted Tuesday:

Macrostrategy, a subsidiary of Microstrategy, has closed a $205 million bitcoin-collateralized loan with Silvergate Bank to purchase bitcoin.

Silvergate Bank “has issued a $205 million term loan under its Silvergate Exchange Network (SEN) Leverage program to Macrostrategy LLC,” Microstrategy detailed.

“The interest-only term loan is secured by certain bitcoin held in Macrostrategy’s collateral account with a custodian mutually authorized by Silvergate and Macrostrategy,” the company noted.

MicroStrategy is one of the more well-known public investors within the digital asset industry, but it’s success so far may likely entice other public companies to follow the same route, especially as there are increasing interest these days to find alternative investments that can preserve portfolio value.

So far, the company has acquired around 125,000 Bitcoin within its treasury and has stated that this is a long-term play where any additional capital that comes in will continually be allocated in the same fashion as a 401k.

Some critics are concerned however that the company may be overleveraging too much capital to a single asset making this a potential disaster in the future.

Others, however, see this as potentially the first of many public companies to do so which further solidifies the digital asset’s increasing role as a reserve currency use to back the value of other assets.

CryptoNewss.com reports:

Under the terms of the agreement, Macrostrategy will use the loan proceeds to purchase bitcoin, pay fees, interest, and expenses related to the loan transaction, or for general corporate purposes for itself or its parent company.

SEN Leverage, launched in 2020, provides access to institutional-grade capital through USD loans secured by bitcoins.

“The SEN Leverage Loan gives us the opportunity to strengthen our position as the leading public investor in bitcoin,” Saylor commented, adding:

By using the capital from the loan, we have effectively turned our bitcoin into productive collateral, allowing us to continue executing our business strategy.

At the time of writing, Bitcoin was able to break the $48k last week which makes the first time it has reached this point since the decline that started in the beginning of 2022.

A break past this point could indicate the market’s exiting out of a bear trend and finally back into a bull trend again sometime later this year.

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