MicroStrategy said on Tuesday it had borrowed $205 million from crypto bank Silvergate Capital to purchase more Bitcoin (BTC). The loan will be backed by some of MicroStrategy’s BTC holdings as collateral.
The move comes amid an ongoing rally in BTC, which has seen the world’s largest cryptocurrency soar to 2022 highs of over $48,000.
The firm is currently the largest holder of BTC on Wall Street, with about 121,044 tokens, or roughly $5.8 billion, according to data from CoinGecko. While it is unclear how many more tokens the firm will acquire with the new funds, $205 million is equal to roughly 4278 tokens.
MicroStrategy will also use the funds from the loan to repay interest and as working capital, the firm said in a joint announcement with Silvergate. The loan was issued through Silvergate’s leverage program, which offers capital-level U.S. dollar loans collateralized by BTC.
Silvergate’s collateralized loans are a popular option through which firms can gain BTC exposure. The bank currently has $570 million in loan commitments through its leverage program.
The firm, which is owned by popular Bitcoin proponent Michael Saylor, is one of the first Wall Street firms to invest in BTC, starting in 2020. The firm has repeatedly taken on debt, either through loans or through note issuances, to increase its BTC holdings.
According to data from CoinGecko, MicroStrategy’s entry value into BTC was about $3.6 billion. The firm is currently sitting on a $2.3 billion profit on its BTC holdings, although that figure does not account for 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 recently also supported BTC’s potential as an inflation hedge, and that the Russia-Ukraine war was likely to boost crypto adoption.
MicroStrategy’s decision to add to its BTC holdings is likely driven by BTC’s ongoing rally, which saw the token touch its highest level this year. Technical indicators have also shown that BTC is poised for more gains, which could make investing in the token highly lucrative.
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