As a seasoned crypto investor with over a decade of experience navigating the volatile digital asset landscape, I find myself torn between the compelling vision proposed by Michael Saylor and the cautionary words of Saifedean Ammous regarding Bitcoin-backed loans.
After receiving approval from the SEC to trade options on BlackRock’s Bitcoin ETF, talks about Bitcoin returns have reignited. In a recent podcast discussion, MicroStrategy’s Chairman, Michael Saylor, voiced his views on Bitcoin’s place within conventional banking institutions.
Michael Saylor Proposes Bitcoin-Backed Loans
During a recent discussion about leverage, banking, and Bitcoin, well-known crypto advocates Michael Saylor and Saifedean Ammous expressed their views on the similarities often found between Bitcoin and conventional banking systems.
Saylor stated that certain large US banks, which are backed by the government, can provide USD loans to users based on their Bitcoin holdings. This means that Bitcoin holders could earn income without having to sell their BTC. Furthermore, they would also profit from any increase in the value of Bitcoin, while simultaneously leveraging the credit reliability of major banks such as JPMorgan, Citigroup, or Bank of America as a bonus.
Currently, Microstrategy is the corporation with the largest quantity of Bitcoin. Last week, it raised funds through a $1.01 billion offering of convertible notes to purchase Bitcoins. Consequently, owning approximately 252,220 BTC, MicroStrategy stands to significantly profit from any Bitcoin returns.
Why Is It A Bad Idea?
In his podcast appearance, Saifedean Ammous – the author of The Bitcoin Standard – voiced concerns about the reliability of Bitcoin yields. He warned that models like this could result in failures akin to those experienced by Celsius or BlockFi. Moreover, he emphasized that these systems cannot function without a backup lender, and people should be aware of the risks associated with using Bitcoin in this way, as they might eventually learn.
Saifedean makes it clear that MicroStrategy’s approach relies heavily on the belief that the US Dollar will never falter. Given the increasing demands for decoupling from the dollar and the ongoing development of BRICS payment systems, one might wonder just how long the US Dollar will continue to rule the global financial system.
Saif accurately points out that the MSTR model relies on the dollar not collapsing. However, Saylor is correct that it won’t disappear immediately. As for the long-term outlook, we’ll have to wait and see.
— Bill Barhydt (@billbarX) September 24, 2024
To help address the lending disparity, Custodia Bank’s CEO, Caitlin Long, suggested that lending Bitcoin up to a 1:1 ratio is acceptable. However, she stated that if the lending exceeds a 1:1 ratio, it implies that the lender is technically insolvent by definition.
Over the last four years, it’s become clear that the MSTR stock has outperformed major tech companies and the S&P 500, largely due to its strong association with Bitcoin adoption.
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2024-09-24 09:49