Key Insights:
Michael Saylor believes that the market isn’t ready for Bitcoin-backed bonds.
The comment was in context with El Salvador offering $1 billion worth of Bitcoin bonds.
MicroStrategy recently took a $205 million loan against $850 million of its Bitcoin holdings.
El Salvador led the revolution of digital asset-based finance last year after making Bitcoin a legal tender.
But the president of the country, Nayib Bukele, did not stop there as he intended on building a whole economy on the back of Bitcoin, including a Bitcoin city.
For the same, last year, El Salvador began offering 10-year Bitcoin bonds at an interest rate of 6.5% per annum. However, as per Michael Saylor, it may not be the best idea.
Michael Saylor Doesn’t Believe in Bitcoin Bonds
In an interview with Bloomberg, the Co-founder, and CEO of MicroStrategy, Michael Saylor, stated that while he dreams of a day when Bitcoin-backed bonds would find the same demand as a mortgage-backed security, he feels that at the moment, selling Bitcoin bonds is not a good idea.
This is because, in his opinion, the market isn’t ready for that. The comment was in reference to El Salvador’s Bitcoin-backed bonds, which have become a necessary instrument for the country to relieve itself from its financial hole.
The country is dependent on Bitcoin enthusiasts and retail investors worldwide to tap into these bonds, which will help El Salvador repay its debts.
But according to Michael, that may not be the most effective strategy given the state of the market. Commenting on the same, he said,
“That’s a hybrid sovereign debt instrument as opposed to a pure Bitcoin-treasury play. That has its own credit risk and has nothing to do with the Bitcoin risk itself entirely.”
What Saylor Suggested Instead
Bank loans. According to Michael, currently, taking out a term loan from a major bank instead of being dependent on retail investors infused Bitcoin bonds is a better idea.
And it feels like the comment came as a justification of MicroStrategy’s recent decisions over an actual suggestion.
Two days ago, it was reported that MicroStrategy had borrowed a three-year term loan worth $205 million from a unit of Silvergate Bank. As collateral, the company used $820 million of its Bitcoin holdings.
This is a relatively small amount for MicroStrategy, which is the biggest Bitcoin holding public company with a stash of 126,164 BTC worth over $5.9 billion at the moment.
And the company will be increasing its BTC treasury further using this $205 million. Given the state of the king coin at the moment, there is a fair chance that the bullishness exhibited by MSTR might fuel the rally further.
As a result, Bitcoin’s 25.48% rise could flip into a bigger number to push BTC towards $50k from its current price of $47,236.
This article was originally posted on FX Empire
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Source: https://finance.yahoo.com/news/microstrategy-michael-saylor-says-bank-111045596.html