Borrowing FIAT to buy Bitcoin. Why is Michael Saylor going All in?

Bitcoin’s price has significantly decreased since its all-time peak in mid-April, trading around $35,000 per coin. Regardless, many enthusiasts believe the best is yet to come, which leads them to increase their BTC positions. 

Recently, MicroStrategy CEO Michael Saylor announced the company’s new strategy of borrowing fiat currency to buy Bitcoin. While many experts say it is a risky move, Saylor believes the strategy is ultimately going to pay off. You can even see some top dogs doubling down on their longs and call options on platforms like Bitlevex. Something is going on – let’s see.

Who is Michael Saylor?

Michael Saylor is the founder of MicroStrategy. He graduated from the Massachusetts Institute of Technology (MIT) in 1987 with a dual major in Science, Technology, and Society, as well as Aeronautics and Astronautics.

To graduate, Saylor worked for a few years as a computer simulation consultant for the Federal Group and Dupont. In 1989, he and co-founder Sanju Bansal founded MicroStrategy. 

The company’s main expertise is to provide business intelligence and cloud computing solutions. In 1992, the company entered into a $10 million deal with McDonald’s as its first major customer, and since then hasn’t looked back. Currently, the company’s market capitalization is $2.65 billion.

• MicroStrategy vs Bitcoin Adoption – Understanding the Context

In 2020, Saylor led MicroStrategy to become the world’s most “pro-bitcoin” listed company. On August 11, the company completed its initial acquisition of 21,454 BTC at a total price of $250 million (each bitcoin costing about $11,653 at the time).

This acquisition was followed by a purchase of 16,796 BTC for US$175 million (at US$10,419 per bitcoin) in September 2020. Then, on December 5, Saylor tweeted that the company had made its third bitcoin purchase, confirming it had purchased another 2,574 BTC for $50 million in cash.

Thereafter, the company continued its investment in Bitcoin, which included raising $400 million via convertible notes to buy bitcoin with the net proceeds.

Massive Bitcoin Investment by MicroStrategy

Since MicroStrategy’s initial acquisition of Bitcoin, the MSTR share price has skyrocketed. In November, for example, the price reached $342.77, the best in 20 years. Recently, during a YouTube hangout, Saylor took some time to clarify any doubts about the subject.

About his strategy, Saylor says that “it would be aggressive if I took a margin loan, especially a margin loan with like an 80% loan to value. It’s pretty obvious that if the thing trades down 20%, and you’re 80% loan to value, you get liquidated.” 

“That’s aggressive – taking an uncorrelated loan against other property, basically mortgaging a company. We borrowed money against the cash flows in our business in order to invest in another business, which is going up more than 100% a year.”

On how MicroStrategy entered the digital asset market, he says – “Actually, we borrowed money in a convertible instrument. It wasn’t secured a secured loan; it was an unsecured convertible loan.”

Also, he stated that “How many companies borrow money to invest in their business? Amazon does, Apple does, etc. In fact, 95% of existing companies have borrowed money. There is probably no piece of real estate ever developed that did not have a loan on it.”

He added that “it’s not strange, in my opinion, to borrow money in order to invest in a business venture, which is what we did. We were the first company to do it in the Bitcoin space, right?”

Final Thoughts

It is impossible to deny the adoption of Bitcoin is going to be a major trend amid traditional investors. About borrowing fiat to invest in Bitcoin, Saylor does not see it as a complicated thing. In his own words, “we basically borrowed money to invest in a big tech monetary network growing more than a hundred percent a year.”