Billionaire Saylor’s MicroStrategy Takes On $205 Million Loan To Buy More Bitcoin As Experts Eye $50,000 Price

top line

MicroStrategy, the data analytics firm run by billionaire crypto bull Michael Saylor, announced Tuesday that one of its subsidiaries has taken out a $205 million loan to buy more bitcoin and is using the cryptocurrency as collateral, again doubling down on its commitment. unprecedented with the world. largest cryptocurrency as nascent market takes a turn.

MicroStrategy added to its growing debt load as the price of bitcoin soars from this ... [+] month lows.

fake images

key facts

On a regular Monday morning presentationMicroStrategy revealed that its wholly-owned subsidiary, MacroStrategy, entered into an agreement with cryptocurrency-focused lender Silvergate Bank on Wednesday to take out a $204.7 million loan, net of fees and closing costs, which it plans to use to buy bitcoin, repay loans expenses or for general corporate purposes.

The three-year loan was secured with around $820 million in bitcoin, which represents around 12% of MicroStrategy's total cryptocurrency holdings; The terms of the deal require that at least $410 million in bitcoin be held as collateral, assuming the total capital of $205 million is held.

In a statement, Saylor said the loan gives MicroStrategy the opportunity to "advance [its] position” as the public company with the largest investment in bitcoins and that the use of cryptocurrency as collateral for the loan, a first for the company, would allow it to further execute its bitcoin strategy.

The company, which began buying cryptocurrencies for its balance sheet in August 2020, says it now has approximately 125,051 bitcoins, purchased for almost $3.8 billion, or an average price of $30,200 per coin, some of which was purchased with the aid of about $2,200. million in debt contracted before last week.

Shares of MicroStrategy were down about 0.6% on Tuesday morning and are down about 9% for the year, compared with a 5% drop for the S&P 500.

The bitcoin price, meanwhile, was up about 1% at $47,803 after turning positive for the year on Monday.

Okay, I added in a bullet: Cryptobank Silvergate tripled its gain to $78.5 million last year as average digital currency customer deposits rose to a record $13.3 billion and their bitcoin-backed loan portfolio grew up to about $570.5 million in commitments; Bank of America recently gave the stock a $200 price target (implying a 50% upside), saying the bank's "first-mover advantage" bodes well, given growing institutional adoption.

Tangent

The resurgence in cryptocurrency prices has fueled a surprising turnaround in the market over the past week, with bitcoin soaring nearly 25% amid positive developments such as Goldman Sachs and BlackRock's first bitcoin options exchange. investor note noting that the war in Ukraine could accelerate the adoption of digital currencies.

pivotal appointment

“[Bitcoin] it is now approaching the important $50,000 level. . . . If it breaks through this key price marker as well, we expect the current bull run to overload as crypto FOMO kicks in,” said Nigel Green, CEO of wealth adviser DeVere Group, in emailed comments Tuesday.

key background

Thanks to its growing investment in bitcoin, rivaled only by Tesla's 42,000 coins, MicroStrategy has made an astonishing turnaround since the dot-com bubble crashed its share price nearly two decades ago. Shares have soared more than 300% since the company started started buying bitcoins. However, prices have also been incredibly sensitive to the enormous volatility of the nascent cryptocurrency market. Battered over the past year, the stock has plunged 51% from a 21-year high in February 2020, when bitcoin prices recently spiked and plunged after Tesla CEO Elon Musk said on Twitter that their prices seemed "a little high".

big number

2.3 trillion dollars. That is the value of the world's cryptocurrencies on Tuesday after rising more than 15% in the last week. The market peaked at more than $3 trillion on Nov. 10, according to crypto data website CoinGecko.