A Look Inside MicroStrategy’s $2.4 Billion Loan Used To Buy Bitcoin

Best Owie

1 year ago

3 mins read

Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Created by industry experts and meticulously reviewed

The highest standards in reporting and publishing

How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

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%.

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.

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 from TradingView.com

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet…

Best Owie

Best Owie is a seasoned managing editor with a wealth of experience currently serving as the Managing Editor at NewsBTC. Best is a highly skilled professional with a track record of producing engaging and informative content. With a keen eye for detail and a passion for accuracy, Best is committed to ensuring that each article published meets the highest standards of quality.

Best has over six years of experience in the crypto industry and has overseen the creation and publishing of thousands of articles over the years. Best is always abreast of everything that is going on in the crypto industry in order to create and curate the most relevant content for readers. This shines through in Best’s publications, which are always clear and concise, enabling easy reading and understanding for all.

Best is also an avid learner and advocate for new technology. This has seen Best dive into topics in areas such as decentralized finance (DeFi), non-fungible tokens (NFTs), Layer 2 blockchains, etc. In addition to this, Best is a vocal member of the crypto community across various social media platforms such as X and Reddit. Best’s work garners tens of thousands of readers monthly, who rely on the information in these publications to keep up-to-date with everything happening in the crypto community.

Best’s articles explore breaking news, intricate systems such as yield farming, liquidity pools, and other decentralized finance (DeFi) systems. This is because Best understands the importance of information to gaining financial freedom and believes that everyone should have access to this information.

Best also believes in leveraging the blockchain for philanthropy to create the most positive social impact. This involves work with charitable organizations focused on financial literacy and education. With each article, Best lends a voice to important issues such as a more financially inclusive future, transparent systems for growth and development, and technology that is not self-serving but one that serves all of humanity.

When not curating engaging content, Best can be found reading a book with a cup of hot chocolate, enjoying a Netflix series, or exploring the outdoors with Green - the world’s most quiet and well-behaved Husky. Best’s interests also span other industries such as art, finance, and security, attending seminars and conferences in not just the crypto industry but other industries as well.

As an animal lover, Best is also involved with charities for animals, local shelters, and rescues. Best is also involved in local events that promote inclusivity, such as being a prominent member of hiking clubs and a cycling club, as well as being a part of a very happy group of animal lovers.

Best is a true professional in every sense of the word, with an exceptional dedication to producing high-quality work. This shines through in Best's work on and off the clock. These include advocating for inclusive crypto education for all, the impact of financial illiteracy, and the benefits of adopting new technologies such as cryptocurrencies. Best’s prolific career in the media industry is a testament of how hard work and dedication pays.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.