MacroStrategy, a subsidiary of publicly-traded company MicroStrategy, has obtained a $205 million loan term to acquire more bitcoin. The latest development represents the first move by MicroStrategy to utilize its sizable bitcoin holdings as collateral to acquire even more bitcoins.
According to Tuesday’s announcement, the loan deal was brokered by crypto-friendly bank Silvergate. Notably, Silvergate is insured by the Federal Deposit Insurance Corporation (FDIC), arguably making it the first FDIC-licensed bank to issue cash loans backed by Bitcoin.
MacroStrategy will use bitcoins delegated to its account by MicroStrategy as collateral. A regulatory filing shows that the subsidiary put up around $820 million worth of bitcoins as collateral. The loaned funds will be dedicated towards purchasing bitcoin as well as servicing interest payments and other charges associated with the loan.
Since incorporating Bitcoin into its treasury management strategy in 2020, MicroStrategy has aggressively grown its exposure. The company is the the largest corporate Bitcoin holder with at least 125,051 BTC acquired at an average of price of $30,194 according to publicly available data. At today’s market price, MicroStrategy’s bitcoin holdings are worth almost $6 billion.
Commenting on today’s development, Bitcoin bull and MicroStrategy CEO Michael Saylor noted:
“The SEN Leverage loan [by Silvergate] gives us an opportunity to further our position as the leading public company investor in bitcoin. Using the capital from the loan, we’ve effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy.”
Will MicroStrategy Further Leverage Bitcoin Holdings?
Given MicroStrategy’s recent history with bitcoin, the latest deal with Silvergate is likely to be the first of many. CEO Michael Saylor has repeatedly described the company’s Bitcoin acquisition spree as a “long-term play,” while also disclosing personal bitcoin purchases.
Despite market drawbacks in recent months where the company’s Bitcoin holdings were worth $4 billion less, MicroStrategy continued to acquire more bitcoin. Time will now reveal to what extent the company will leverage its existing holdings to grow its bitcoin exposure. Industry observers will also be keen to note how the company manages broader market drawbacks without compromising on its commitment to hold bitcoin long-term.
