TL;DR
- Michael Saylor, Chairman of MicroStrategy, proposed that government-backed banks in the U.S. offer dollar loans with Bitcoin as collateral.
- MicroStrategy, holding 252,220 BTC in its portfolio and having raised $1.01 billion, argues that this strategy could generate passive income for BTC users.
- Although Bitcoin-backed loans offer quick access to funds, they also present risks due to BTC’s volatility, which could require additional collateral during market downturns.
In a recent podcast, Michael Saylor, Chairman of MicroStrategy, proposed that government-backed banks in the United States offer dollar loans using Bitcoin (BTC) as collateral.
This strategy would allow Bitcoin users to earn yields without having to sell their assets. The proposal comes amid growing interest in Bitcoin yields and following the SEC’s approval for options trading on BlackRock’s BTC ETF.
MicroStrategy, recognized as the largest corporate holder of Bitcoin, maintains 252,220 BTC in its wallet and recently raised $1.01 billion with the goal of acquiring more. Saylor argues that this new form of loans could provide passive income to BTC holders, allowing them to benefit from the asset’s price appreciation while accessing liquidity through loans granted by major banks like JPMorgan, Citi, and Bank of America.
Bitcoin-backed loans offer advantages. They allow users to quickly access funds without having to liquidate their holdings. This speed in approval is an important attraction for those looking to capitalize on BTC price increases without giving up their assets.
The Risks of Bitcoin Volatility
However, this model also presents considerable risks. The inherent volatility of Bitcoin can cause rapid fluctuations in the value of collateral, which could require borrowers to provide additional collateral during market downturns.
Despite Saylor’s optimism, there are critical voices in the community. Saifedean Ammous, author of “The Bitcoin Standard,” expressed concern about the sustainability of this type of lending. According to Ammous, the collapse of platforms like Celsius and BlockFi illustrates the dangers of these models, which lack the stability provided by a lender of last resort. Additionally, Ammous warned that the success of these loans largely depends on the strength of the dollar, an uncertain aspect amid discussions about de-dollarization processes.
On the other hand, Caitlin Long, CEO of Custodia Bank, opined that Bitcoin loans at a 1:1 ratio are viable, but any higher ratio could suggest a risk of insolvency
