Cryptocurrencies have never been dull for a day. Recently, the digital asset market has fallen by about 50%, eventually reducing the total market value from an all-time high of 2.5 trillion US dollars to around 1.7 trillion US dollars.
As expected, after all these turmoil, the business intelligence company MicroStrategy led by Michael Saylor announced that it was ready to “buy on dips”-success Completed its US$500 million secured notes issuance.
To further elaborate on the matter, according to a statement Released The company revealed that MicroStrategy has been able to sell $500 million worth of “senior secured notes” to a certain number of buyers outside the United States through private placement. Of the above total, after deducting fees, initial buyer discounts and commissions, the net total will reach 488 million U.S. dollars, all of which will be used for additional Bitcoin (Bitcoin) Acquired by the company.
In order to quickly review MicroStrategy’s recent crypto buying efforts, it should be emphasized that since last August, the company Purchased 250 million USD worth of BTC -The fact that the company has been in a Bitcoin buying frenzy highlights the fact that the company hold A total of 92,079 BTC, equivalent to nearly 3.8 billion U.S. dollars.
Finally, it is worth mentioning that if the value of BTC continues to hover around the $40,000 area, MicroStrategy is likely to be able to add approximately 11,900 bitcoins to its balance sheet, thereby bringing the company’s total crypto assets to more than $4.2 billion.
Is MicroStrategy’s move wise?
On June 7, MicroStrategy announced the launch of the above-mentioned private placement, initially expressing its hope to raise “approximately US$400 million in total principal”; however, as mentioned earlier, this number is now close to US$500 million.More importantly, after the announcement, Michael Seller claimed that his company had Received an order worth 1.6 billion U.S. dollars For their latest product-four times the initial amount.
Kadan Stadelmann, CTO of Komodo, a blockchain solution provider, told Cointelegraph that MicroStrategy’s move is not surprising, especially considering that its newly established subsidiary MacroStrategy LLC. already owns a large amount of BTC, adding:
“Michael Seller is clearly focused on long-term investment strategies, not short-term gains or losses. Putting company debt at risk is risky, but it obviously can also bring huge returns.”
In this regard, it is worth mentioning that this development has clearly had a positive impact on the Bitcoin market. Combined with other good news, since the announcement, the price of BTC has jumped from just over US$35,000 to over US$40,000. Stadelmann concluded: “Despite this news, the market does look bearish overall, but one or two more stories about major institutions adopting Bitcoin or other cryptocurrencies are likely to bring the bull market back.”
Similarly, Konstantin Anissimov, executive director of the cryptocurrency exchange CEX.IO, told Cointelegraph that, to say the least, the consistency of MicroStrategy’s continued accumulation of bitcoin is contagious. In his view, the $500 million bond strategy is a means to emphasize the company’s highly futuristic outlook:
“MicroStrategy seems to see a very promising future for Bitcoin, something that no one else has seen. Although these initiatives may not affect the price of Bitcoin, when the price exceeds the previous all-time high, MicroStrategy Will become one of the biggest beneficiaries.”
Is Bitcoin severely undervalued?
MicroStrategy’s continuous encryption accruals raises a related question: Is Bitcoin undervalued now? Daniel Peled, co-founder of Orbs, an interoperable blockchain platform based on Ethereum, told Cointelegraph that he was impressed with Saylor’s belief in Bitcoin and his general financial management decisions, especially in these unprecedented periods of quantitative easing, and Added:
“The market currently underestimates the value of BTC, including the high deviation of the stock-to-flow model, the NVT signal, and Elon Musk’s confirmation that Tesla did not sell any of its remaining BTC and may accept this fact. If there are enough miners Will switch to clean energy and use BTC as payment.”
Peled further believes that MicroStrategy has increased this excellent opportunity by setting up its bond issuance to ensure that only BTC purchased with issuance proceeds is a high-level guarantee, and the annual interest rate is significantly lower than the company’s annual profit level, making it at least in the foreseeable future The ability to pay its payments.
The structure emphasized above effectively limits the company’s ability to negatively affect the company’s core business and assets, especially if its bet on additional BTC is not rewarded. “When the BTC market corrects to reflect fundamentals, it benefits MicroStrategy,” Peled believes.
MicroStrategy and the future of Bitcoin
When MicroStrategy began its plan to purchase cryptocurrencies through its first corporate bond issuance program, the value of Bitcoin hovered near the threshold of around $17,000, but it soared nearly four times in the following months. Therefore, it is reasonable to believe that the company may see major events in BTC in the near to mid-term, especially after this period of ongoing turmoil subsides.
In addition, as pointed out earlier, since MicroStrategy’s latest product was reportedly oversubscribed when it was launched, global investors still seem to be interested in Bitcoin.Not only that, even the SEC’s Decision on VanEck’s Bitcoin ETF The application is currently awaiting, and if approved, it may become another catalyst for the continued adoption of BTC.
Steven Gregory, CEO of the U.S. subsidiary of the cryptocurrency exchange Currency.com, told Cointelegraph, “The almost ironic incident brought about by this bond issuance is that the Federal Reserve was unknowingly through their garbage purchase plan. In contact with this round.”
Jack Tao, CEO of cryptocurrency exchange Phemex, believes that this move is in line with the overall trend of institutional funds flowing into cryptocurrencies. However, what shocked him was that despite the continued bearish conditions, all these developments were happening, as he told Cointelegraph: “Many people in the traditional financial sector are beginning to realize that cryptocurrency has the potential to trigger an unprecedented paradigm shift. They started investing in this technology, not just chasing speculative profits.”
MicroStrategy’s decision to borrow from the corporate junk bond market to fund its BTC acquisitions seems to largely reflect the Fed’s current An inflationary “quantitative easing” policy designed to help alleviate the impact of the COVID-19 pandemic on the US economy.
In fact, the numbers speak for themselves, and the fact that corporate borrowing has never been easier can best illustrate this point. For example, MicroStrategy’s latest product promises a yield of 6.25%–6.5%, while the average junk bond yield is 4.01%.
Therefore, it will be interesting to see if others will follow in Saylor’s footsteps and continue to accumulate Bitcoin holdings, especially after the recent announcement that El Salvador will start Accept flagship cryptocurrency as legal tender.