Against naysayers, Saylor's macro-micro Bitcoin strategy is paying off. The post MicroStrategy Repaid its $205M Debt to a Collapsed Bank With a 21% Discount appeared first on Tokenist.
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Prepaid Loan Discount
On the one hand, the borrower doesn’t have to pay extra fees and prepayment penalties. And on the other hand, the lender has access to extra liquidity from the sooner-than-expected principal repayment.
MicroStrategy Buys More Bitcoins
In addition to favorable loan repayment, MicroStrategy added to its Bitcoin coffers. For $150 million in cash, MicroStrategy and subsidiaries bought another 6,455 BTC for $23,238 per Bitcoin.
This elevates MicroStrategy’s Bitcoin holdings to 138,955 BTC, at an aggregate purchase price of $4.14 billion. Of the total amount, the average Bitcoin purchase price is now $29,817. After last year’s underperformance of -57%, MSTR stock is now turning a new leaf in Bitcoin’s rallying footsteps.
Saylor’s Debt Managing Strategy
In August 2022, Michael Saylor stepped down as MicroStrategy CEO, which he co-founded, following a ~$1 billion loss in impairment charges on Bitcoin holdings. In his present position as Executive Chairman, Saylor has been one of Bitcoin’s key evangelists.
In September 2022, despite the bearish cycle and the company’s downturn, Saylor forecasted Bitcoin’s price at $500,000 within a decade. He arrived at that number by framing Bitcoin as comparable to gold, in which gold’s ~$10.5 trillion market cap is divided by Bitcoin’s supply of 21 million BTC.
Saylor’s MicroStrategy became the first publicly traded company to go full-on Bitcoin within this framework. In August 2020, the company bought its first batch of 21,454 BTC at $250 million from its cash reserves.
A convertible bond is a type of debt security that can be converted into shares later. This allowed the company to raise capital without diluting its existing shares. In the case of MicroStrategy, the proceeds were used to buy Bitcoin.
The debt-incurring strategy has a long-term outlook, extrapolating from Bitcoin’s ‘sound money’ pitch, specifically, as a hedge against the vulnerabilities of central banking, such as inflation, and fractional reserve banking, such as loss of access to one’s funds.
Although Bitcoin is volatile, Saylor counts on this double-edged sword to land on the positive edge. Between 2012 and 2023, Bitcoin outperformed other potential inflation hedges by a substantial margin.
Additionally, Bitcoin ETF could cover this digital asset with an aura of institutional legitimacy. Amid the US banking crisis, such an aura has already emerged organically.
Do you think Bitcoin’s gains will materialize per Saylor’s forecast? Let us know in the comments below.