Microstrategy takes $205 million in BTC-backed loans to buy more Bitcoin
Microstrategy is one of the biggest bitcoin hodlers and is led by Micahel Saylor, a strong proponent of the same. They have over 125,000 BTC in their wallet, but it seems that is not enough as Microstrategy is taking $205 million in BTC-backed loans to buy more. It’s been almost 2 months since they’ve made any purchases, so I guess it was about time.
Microstrategy plans to buy more Bitcoins
The Bitcoin-backed loan was acquired from Silvergate Bank. In this loan, the collateral is the Bitcoin that Microstrategy holds in its account. This is the first time we have seen demand for a Bitcoin-backed loan on such a scale. For the loan, Microstrategy had to agree a common custodian with Silvergate Bank to store the required Bitcoins. It is an interest-only term loan, which means that the principal amount remains unchanged for the life of the loan and the borrower pays only the interest.
The terms and conditions of the loan state that the company can buy Bitcoins with it, pay fees, expenses or interest related to the loan or use it for business purposes. Let’s see when Microstrategy announces its next purchase; I am optimistic it will be very soon.
Silvergate Bank’s Bitcoin-Backed Loan
To provide the loan, the bank used its Silvergate Exchnage Network (SEN), which launched in 2020 to provide Bitcoin-backed loans. Michael Saylor said the option gave them a chance to increase their position in Bitcoin as investors. And the company is also able to use its Bitcoins without selling them, which is the trick.
Microstrategy could also use the loan for commercial purposes. This is because they have always been wary of keeping money. The company’s strategy is to acquire more BTC when it has excess cash flow. So it is possible that they have no funds for their business due to low cash flow. Still, I hope they will use at least some of it to get more Bitcoins.
The benefit of a Bitcoin-backed loan is that borrowers won’t have to miss out on BTC earnings. If they had sold their holdings, the case would have been different. Do you think this is a good idea because Microstrategy is taking $205 million in BTC-backed loans? Let us know in the comments below. Also, if you found our content informative, like it and share it with your friends.
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