Bank loan

MicroStrategy’s Michael Saylor says “Bank Loan > Bitcoin Bonds” for now

Key ideas:

  • Michael Saylor thinks the market is not ready for Bitcoin-backed bonds.
  • The comment was in context with El Salvador offering $1 billion in Bitcoin bonds.
  • MicroStrategy recently took out a $205 million loan against $850 million of its Bitcoin holdings.

El Salvador led the digital asset-based finance revolution last year after making Bitcoin legal tender.

But the country’s president, Nayib Bukele, didn’t stop there as he intended to build an entire economy on the back of bitcoin, including a bitcoin city.

For the same, last year El Salvador started offering 10-year Bitcoin bonds at an interest rate of 6.5% per annum. However, according to Michael Saylor, this may not be the best idea.

Michael Saylor Doesn’t Believe in Bitcoin Bonds

In an interview with Bloomberg, MicroStrategy co-founder and CEO Michael Saylor said that while he dreams of a day when Bitcoin-backed bonds find the same demand as a mortgage-backed security, he believes that at the moment, selling bitcoin bonds is not a good idea.

This is because, according to him, the market is not ready for it. The comment referred to El Salvador’s bitcoin-backed bonds, which have become a necessary instrument for the country to relieve itself of its financial hole.

The country depends on bitcoin enthusiasts and retail investors around the world to mine these bonds, which will help El Salvador repay its debts.

But according to Michael, this may not be the most effective strategy given the state of the market. Commenting on the same, he said,

“It is a hybrid sovereign debt instrument as opposed to a pure bitcoin cash game. It has its own credit risk and has nothing entirely to do with bitcoin risk itself.

What Saylor suggested instead

Bank loans. According to Michael, currently taking out a term loan from a major bank instead of depending on retail investors infused with Bitcoin bonds is a better idea.

And it looks like the comment came as a vindication of MicroStrategy’s recent decisions on 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 largest public bitcoin holding company with a stash of 126,164 BTC worth over $5.9 billion at present.

And the company will further increase its BTC treasury using this $205 million. Given the current state of the king coin, there is a good chance that the uptrend displayed by MSTR will further fuel the rally.

As a result, Bitcoin’s 25.48% rise could turn into a bigger number to push BTC towards $50,000 from its current price of $47,236.