MicroStrategy announced on Tuesday that it had taken out a $205 million loan from cryptocurrency bank Silvergate Capital to buy more Bitcoin (BTC). Some of MicroStrategy’s BTC holdings will be used as security for the loan.
The decision comes during a BTC boom that has seen the world’s largest cryptocurrency reach highs of nearly $48,000 in 2022.
According to CoinGecko data, the firm is currently the largest BTC holder on Wall Street, with approximately 121,044 units, or over $5.8 billion. While it is unclear how many additional tokens the corporation will buy with the fresh assets, $205 million is equivalent to approximately 4278 tokens.
In a joint release with Silvergate, MicroStrategy stated that the proceeds from the loan will be used to repay interest and as operating capital. The loan was made possible by Silvergate’s leverage programme, which provides capital-level US dollar loans with BTC as collateral.
Collateralized loans from Silvergate are a popular way for businesses to get BTC exposure. The bank’s leverage programme presently has $570 million in loan commitments.
Collateralized loans from Silvergate are a popular way for businesses to get exposure to Bitcoin. Through its leverage programme, the bank has received $570 million in loan commitments.
MicroStrategy’s entry worth into Bitcoin was around $3.6 billion, according to CoinGecko data. The company presently has a $2.3 billion profit on its Bitcoin holdings, but that amount does not include its debt obligations.
“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.” Said Michael Saylor, Chairman and CEO of MicroStrategy
Saylor has recently backed BTC’s potential as an inflation hedge and predicted that the Russia-Ukraine conflict will enhance crypto adoption.