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The approval of options trading for BlackRock’s Bitcoin 
$108,871 ETF by the SEC sparked renewed discussions about Bitcoin returns. In a recent podcast, Michael Saylor, the chairman of MicroStrategy, shared his insights on Bitcoin’s role in the traditional banking system.
Proposing Bitcoin-Backed Loans
Saylor suggested that U.S. banks, often supported by the government and experiencing “very rare failures,” could offer loans in U.S. dollars backed by Bitcoin assets. This approach would enable Bitcoin holders to earn returns without selling their BTC while leveraging Bitcoin’s price appreciation. He added that major banks like JPMorgan, Citi, or Bank of America would also benefit from the associated credit risks.
MicroStrategy currently holds the largest corporate BTC position, having raised $1.01 billion through a convertible bond offering for Bitcoin purchases last week. With a substantial stock of 252,220 BTC, MicroStrategy stands to gain significantly from Bitcoin returns.
Critiques and Risks
Conversely, Saifedean Ammous, author of The Bitcoin Standard, expressed skepticism regarding the viability of Bitcoin returns during the podcast. He warned that such models could lead to failures, akin to those seen with Celsius or BlockFi. Furthermore, he cautioned that systems of this nature are unsustainable without a last-resort lender, believing people will eventually learn the risks of leveraging BTC in this manner.
Saifedean explicitly noted that MicroStrategy’s model rests on the assumption that the U.S. dollar will never fail. However, with increasing anti-dollar sentiment and the functionality of BRICS payment systems, the dollar’s longevity in the global financial system remains uncertain.
Caitlin Long, CEO of Custodia Bank, suggested that there is “no harm in lending BTC at a 1:1 leverage.” However, lending at such leverage inherently implies that the lender has defaulted.
Notably, MSTR shares have significantly outperformed major tech giants and the S&P 500 over the last four years, largely benefiting from Bitcoin adoption. These discussions offer crucial insights into Bitcoin’s integration into the traditional financial system and the risks associated with leveraging. While Bitcoin-backed loans may provide liquidity to investors, they also carry systemic risks that must be carefully weighed before use.
