MicroStrategy Borrows Against Bitcoin to Buy More Bitcoin

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MicroStrategy arm MacroStrategy used a portion of the Bitcoin held in its reserves as collateral for the loan. 

MicroStrategy Announces Bitcoin Buy 

After accumulating some 124,000 Bitcoin, MicroStrategy is now borrowing against its holdings to buy more coins. 

The business intelligence firm’s Chairman and CEO Michael Saylor announced Tuesday that MacroStrategy, a MicroStrategy subsidiary, had closed a $215 million loan with Silvergate Bank. Saylor, known in the crypto community for his unshakeable conviction in the top crypto asset, said that MacroStrategy had used a portion of its Bitcoin reserves as collateral in the arrangement. 

A press release explained how the interest-only term loan is “secured by certain Bitcoin held in MacroStrategy’s collateral account,” though it didn’t elaborate on the amount provided. It went on to say that the $215 million loan would be used to acquire Bitcoin and cover fees, corporate purposes, and other expenses. 

Silvergate, one of the top crypto-native firms catering to the fast-growing institutional demand for digital assets, uses a service called SEN Leverage to provide Bitcoin-collateralized loans. MacroStrategy used SEN Leverage to get the loan. 

“The SEN Leverage loan gives us an opportunity to further our position as the leading public company investor in Bitcoin,” Saylor said. “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.”

The loan follows almost two years of heavy Bitcoin accumulation from Saylor’s organization. Since making an initial investment in the asset during pandemic-induced economic turmoil in August 2020, MicroStrategy has become the world’s largest corporate Bitcoin holder, with 124,391 coins on its balance sheet as of Dec. 31, 2021. Its initial investment was one of several catalysts that kickstarted a crypto frenzy in 2021, setting the stage for other major companies like Tesla and Block (formerly Square) to make first-time Bitcoin purchases. By the end of the year, Bitcoin had peaked at $69,000, and El Salvador was holding it in its treasury. 

In recent months, MicroStrategy has taken several adventurous steps to get liquidity to buy more Bitcoin, including offering over $1.7 billion in convertible senior notes to institutional investors and launching a $1 billion common stock offering. As a result of its large-scale accumulation, MSTR has performed largely in tandem with Bitcoin. Though it’s down from its February 2021 high, it last traded at $511, up 315% since MicroStrategy’s first purchase.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies. 

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