MicroStrategy plans to lend out its Bitcoin holdings to generate yield

• CEO Michael Saylor discussed the plans on an investor day call

• MicroStrategy’s junk bonds are trading around 100 cents on the dollar

Enterprise software solution provider MicroStrategy Inc is looking for ways to generate yield on its massive Bitcoin holdings of more than 122,000 digital coins, worth over $5.6 billion.

Bitcoin evangelist and MicroStrategy’s CEO Michael Saylor, who has been using the company’s cash flows to buy the cryptocurrency, on Thursday, discussed the strategy on the company’s investor day call with shareholders.

Along with filing an equity shelf registration to raise money to acquire the digital coin, it also issued two convertible bonds and a secured junk bond.

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While Saylor said the company hasn’t taken any formal steps yet to put its Bitcoin cache to use, he added that “there may be opportunities to either put a mortgage against it and generate long-term debt under favorable circumstances, which we could leverage up against the Bitcoin, or we think that we could lend it to a trustworthy counterparty.”

Lending cryptocurrency

Crypto-lending is a booming business in the digital currency sector and decentralized finance (DeFi), where crypto holders often stake their holdings in exchange for higher yields.

Saylor said MicroStrategy could lend out its Bitcoin once the company finds that right fit — whether with a big technology company, bank, or some other player.

“That could become a good source of income for us, or we could develop it with some kind of interesting applications,” he said.

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The CEO also said he sees the possibility of a developing market to issue bonds backed by Bitcoin eventually.

“I think that we’re still a little bit too soon to say whether there’s a good Bitcoin-backed bond market, but I look forward to exploring that in the future,” he said, adding that he would approach this kind of bond offerings if it provides growth to its shareholders.

Saylor said the company would continue to look at its existing options like equity issuance and corporate debt to purchase more Bitcoin.

Bitcoin exposure

Moreover, MicroStrategy’s junk bond issuance from June allowed more traditional institutional investors to gain exposure to Bitcoin while being protected from the volatile nature of the price of the digital token.

The junk bonds currently trade around par, or 100 cents on the dollar, according to Trace bond-pricing data.

Picture Credit: CoinDesk