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MicroStrategy Weighs Lending Out Its Bitcoin Haul for Yield

Michael Saylor discussed the possibility of MicroStrategy lending Bitcoin on a Thursday company call.

MicroStrategy Weighs Lending Out Its Bitcoin Haul for Yield
Photo: Bloomberg

Key Takeaways

  • Michael Saylor has said that MicroStrategy could lend out its Bitcoin to a trusted counterparty or use it to generate debt.
  • He also said that the firm could explore a Bitcoin-backed bond market if it emerged in the future.
  • MicroStrategy currently owns at least 122,478 Bitcoin.

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Bitcoin’s largest corporate holder may explore lending out the asset to counterparties. 

MicroStrategy Discusses Lending Out Its Bitcoin 

After accumulating 122,478 Bitcoin, MicroStrategy may look at putting its holdings to work in the future. 

On a Thursday call with shareholders, the business intelligence company’s CEO Michael Strategy discussed the option of generating debt from its Bitcoin and lending the asset out to a counterparty. He said: 

“There may be opportunities to either put a mortgage against it and generate long-term debt under favorable circumstances, which we could leverage up against the Bitcoin, or we think that we could lend it to a trustworthy counterparty.”

MicroStrategy placed an initial $250 million bet on Bitcoin back in August 2020 and has taken an unorthodox approach to increasing its reserves. Since its first Bitcoin buy, it’s issued two convertible bonds, ran a debt offering of senior secured notes, and a securities offering to sell its Class A Common Stock in a bid to raise funds to buy more Bitcoin. With the various Bitcoin purchases the firm has made over the last 17 months, it now holds over 0.5% of the Bitcoin supply worth over $5.6 billion. 

Crypto lending has become increasingly popular in recent years, not least in the fast-growing DeFi niche. DeFi users routinely deposit their crypto assets to liquidity pools in exchange for yield, but as DeFi is largely based on Ethereum, Bitcoin isn’t the first asset of choice for earning yield. To put Bitcoin to work, crypto users typically deposit a wrapped version of the asset in DeFi or lend it out to a centralized service such as Kraken or Celsius Network. 

During the call, Saylor discussed how lending out Bitcoin could be lucrative for MicroStrategy. “That could become a good source of income for us, or we could develop it with some kind of interesting applications,” he said.  

It’s unclear how those applications would look, but the growing interest in DeFi on Bitcoin means that holders like MicroStrategy could potentially natively earn yield on applications based on the Bitcoin blockchain in the future. Jack Dorsey’s Block is currently planning to build a Bitcoin-based decentralized exchange called tbDEX, which it promises will “create ubiquitous and accessible on-ramps and off-ramps that allow the average individual to benefit from crypto innovation.” 

Saylor also discussed the possibility of a Bitcoin-backed bond market emerging in the future. “I think that we’re still a little bit too soon to say whether there’s a good Bitcoin-backed bond market, but I look forward to exploring that in the future,” he said, before confirming that he would consider such a bond offering in the future. 

Saylor also said that MicroStrategy would continue looking into issuing equity and corporate debtboth with a view to buying more Bitcoin. 

While Saylor and MicroStrategy haven’t wavered on their belief in Bitcoin, the market has shown less confidence in recent weeks. The leading crypto asset is trading at $46,800 at press time, 32% short of its November high. MicroStrategy shares are also down since November, currently changing hands for $577.70.

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

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