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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 move comes during a BTC boom that has seen the world's largest cryptocurrency rise to over $48,000 highs in 2022.
According to CoinGecko data, the corporation is currently the top BTC holder on Wall Street, with over 121,044 tokens worth $5.8 billion. While it's unknown how many more tokens the company will purchase with the fresh capital, $205 million is roughly equal to 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 program, 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 program presently has $570 million in loan commitments.
MicroStrategy was one of the first Wall Street firms to invest in Bitcoin.
Starting in 2020, the firm, which is controlled by well-known Bitcoin proponent Michael Saylor, will be one of the first Wall Street firms to invest in Bitcoin. To boost its BTC holdings, the company has regularly taken on debt, either through loans or note issuances.
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.” – Michael Saylor, Chairman and CEO of MicroStrategy
Saylor had previously stated that BTC could be used as an inflation hedge and that the Russia-Ukraine conflict will likely enhance crypto usage.
The move comes in the midst of a BTC rise.
BTC’s continuing climb, which saw the token reach its highest level this year, certainly influenced MicroStrategy’s decision to increase its BTC holdings. Technical indicators have also indicated that BTC is primed for more rises, suggesting that investing in the coin might be quite profitable.
