A Look Inside MicroStrategy’s $2.4 Billion Loan Used To Buy Bitcoin
08 Giugno 2022 - 01:00AM
NEWSBTC
Software firm MicroStrategy has cemented its position as a major
Bitcoin player with its numerous large purchases. The company which
is valued at $1 billion had put a significant portion of its own
funds into buying BTC but the majority of the money used to
purchase all of the bitcoin had been from loans. These loans which
include convertible notes, senior secured loans, and bitcoin-backed
loans account for $2.4 billion of its $3.97 billion BTC purchases.
How The Loans Look MicroStrategy had used convertible notes to fund
a good portion of its bitcoin holdings. These notes are converted
into stock of the company when they mature. So basically, they are
a payment towards future stock ownership of the software company.
The convertible notes make up $1.75 billion which are pegged at a
0% to 0.75% interest rate. Making up by far the largest part of the
loans MicroStrategy has taken out to buy bitcoin. The other loans
are much lesser compared to the convertible notes. An example is
the senior secure loans. Data shows that MicroStrategy had only
taken $500 million in these senior secured loans to purchase
bitcoin. These, however, carry a higher interest rate at 6.1%.
Related Reading | Bullish: Bitcoin Marks First Green Weekly
Close After Two Months In The Red Lastly, MicroStrategy had also
secured bitcoin-backed loans. These loans were first-of-its-kind
loans when they were taken out by the software company. The $205
million was also used to purchase more BTC with an interest rate of
around 4%. The Bitcoin-backed loan carries the possibility of a
potential margin call, as noted by the CFO. However, this is only
possible if the price of BTC were to drop significantly from this
point to $21,000 and below. Given current prices, there is still a
long way to go before this becomes an issue. Nevertheless, the
possibility of this has sparked fear in investors and
MicroStrategy’s stock price has taken a hit in the last couple of
weeks. | Source: BTUCSD on TradingView.com CEO Michael Saylor has
assured investors to not worry about this though as the company has
more than enough BTC to serve as collateral for its bitcoin-backed
loans were prices to ever fall this low. MicroStrategy’s Bitcoin
Holdings MicroStrategy remains the public company with the largest
bitcoin holdings in the world with more than 129,000 BTC to its
name. The total entry price of the BTC is $3.97 billion and at
current prices, the software company is losing money as its 129,218
BTC is valued at $3.87 billion. Related Reading | El Salvador
Postpones Bitcoin Bonds A Second Time, Here’s Why The company had
used about $1.57 billion from the proceeds of its business to
purchase BTC. The rest of it had all been financed by various types
of loans, as stated above. Nevertheless, the company has been vocal
about its decision to not sell any of its BTC and plans to hold it
for the long term. Its holdings see it holding 0.615% of the total
circulating bitcoin supply. MicroStrategy’s bitcoin play is not all
roses given that its bitcoin-backed loans carry the risk of a
margin call that could reduce its position and the value of its
holdings. However, if bitcoin were to go on another bull rally and
reach $100,000 as predicted by a lot of industry experts, the
software company could quickly become one of the most valuable
companies in the world. Featured image from BitcoinSensus, chart
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