According to Michael Saylor, the CEO of MicroStrategy, Bitcoin loans will enable BTC holders to generate a yield without the need to transfer their assets.
Discussions regarding Bitcoin yields have resumed following the SEC’s approval of options trading on the BlackRock Bitcoin ETF. In a recent podcast debate, MicroStrategy Chairman Michael Saylor expressed his perspective on the function of Bitcoin in the conventional banking system.
Michael Saylor Puts Forward Bitcoin-backed loans
Prominent crypto figures Michael Saylor and Saifedean Ammous recently discussed the common synergies between Bitcoin and the traditional banking sector during the recent debate on leverage, banking, and Bitcoin.
According to Saylor, the government-backed US institutions too large to fail can provide users with USD loans in exchange for their Bitcoin holdings. He further stated that this would enable BTC proprietors to generate a yield and sustain themselves without selling their BTC.
Furthermore, they would capitalize on the credit risk of major institutions such as JPMorgan, Citi, or Bank of America, in addition to the BTC price appreciation.
At present, Microstrategy is the largest corporate holder of BTC. Last week, it conducted a $1.01 billion convertible notes debt offering to acquire Bitcoins. Therefore, MicroStrategy can significantly capitalize on Bitcoin yields due to its substantial stockpile of 252,220 BTC.
Why is it a bad idea?
Nevertheless, Saifedean Ammous, the author of The Bitcoin Standard, has expressed skepticism regarding the feasibility of Bitcoin yields in the podcast. He stated that such models could result in disasters similar to those observed with Celsius or BlockFi.
Additionally, he warned that these systems are unsustainable without a lender of last resort. Ammous believes that individuals will eventually become aware of the hazards associated with utilizing BTC in this manner.
Saifedean unequivocally emphasizes that MicroStrategy’s model is predicated on the notion that USD would never falter. However, with the BRICS payment systems in operation and the increasing demands for de-dollarization, how long will the USD continue to dominate the global financial system?
To address this lending disparity, CEO Caitlin Long of Custodia Bank suggested that “lending BTC up to 1:1 leverage is acceptable.” The lender is insolvent by definition if they lend with a leverage exceeding 1:1.
As we know, the MSTR stock has experienced significant gains due to the adoption of Bitcoin, surpassing the S&P 500 and other prominent technology companies over the past four years.
