MicroStrategy has raised its latest note offering, meant to fund additional bitcoin purchases, after receiving major interest.
Software intelligence firm MicroStrategy has reportedly raised its latest note offering from $400 million to $500 million, bearing an interest rate of 6.125%, which will fund more bitcoin purchases by the company, according to a recent report by Yahoo Finance.
MicroStrategy released an announcement on the pricing update.
The company received a large number of orders totaling $1.6 billion from hedge funds, according to Yahoo Finance, prompting the company to increase the note sale from $400 to $500 million. The significant amount of interest for MicroStrategy’s recent junk bond sale comes as the price of bitcoin has decreased by more than 40% over the last month.
Recent mainstream news narratives have apparently hampered bitcoin’s price movements, yet institutional investors seem unbothered, as bids for notes from MicroStrategy, a company that holds 92,079 BTC in its corporate treasury, have been massively oversubscribed.
It is important to note that, though the company received a total of $1.6 billion in interest, this does not mean that the company will sell $1.6 billion in bonds to buy bitcoin, as CEO Michael Saylor and company may see the annual debt service at that amount as unserviceable.
The company predicts that after deducting purchaser discounts and commissions, as well as other expenses, the net proceeds will be $488 million. The recent move comes after the company recently announced the launch of MacroStrategy, a new subsidiary that will manage its bitcoin holdings.
British regulators have forced bitcoin exchange Luno to take down ads recommending bitcoin purchases.
A creative advertising slogan curated by Luno, a United Kingdom-based bitcoin exchange, has been banned by the U.K.’s Advertising Standard Authority (ASA), according to a recent report from CNBC.
Posters displayed across the London Underground network and on London buses prominently stated slogans like, “If you’re seeing bitcoin on the underground it’s time to buy.” The ASA quickly demanded that the ads be taken down, declaring that the campaign failed to highlight the risks associated with investing in bitcoin.
The ASA declared that Luno must ensure that their future marketing communications make “sufficiently clear that the value of investments in bitcoin was variable and could go down as well as up,” per CNBC.
Paired with this, the ASA said that Luno needs to highlight that it and the bitcoin market at large are unregulated.
The ASA banning ads due to concerns that the price of bitcoin fluctuates while implying that the asset is not a safe store of value coincides with the beliefs of many central bankers across the globe. Yet these statements are inherently hypocritical, as all fiat currencies issued by central banks have devalued at a rapid pace over the course of history, clearly seen by the British pound’s massive devolution over time, for instance.
The ASA proclaiming that the ad is “irresponsible” is a ridiculous notion. Most entities would rather promote fiat currencies than bitcoin. Yet, bitcoin is the only tool that protects one’s time from being stolen away. In reality, not promoting bitcoin is an irresponsible choice.
The country is a haven for the digital asset as it embraces the revolution of independent money.
The presence of bitcoin continues to accelerate in Argentina, a country that has been severely affected by government-sanctioned anti-free market policies. Citizens of Argentina have long utilized the U.S. dollar as a means to transact outside of the traditional system, yet bitcoin has been gaining traction in the country over the last few years. Recently, the Latin American director of digital exchange Binance told AFP News, “The number of user accounts for investing in ‘cryptos’ has multiplied by ten in Argentina since 2020,” detailing a staggering increase in the number of users.
The Economic History Of Argentina
Argentina entered the 20th century as one of the wealthiest countries throughout the entire world. Prior to World War I, Argentina was richer than the traditional European superpowers of France, Germany and their Spanish colonizers. The country continued to grow throughout the first half of the 20th century, albeit at a slower pace than the rest of the world but still maintaining a positive growth rate.
Yet, in 1975, the economic scenario in the country quickly changed; from 1975 to 1990, the country experienced economic stagnation and dramatic inflation. Starting in 1975, the government enacted the Rodrigazo, a series of centrally planned government policies that aimed to centralize economic decision-making. As a result, inflation averaged over 300% per year from 1975 to 1990, reaching severe hyperinflation rates of 2,600% in 1989 and 1990. These bouts of government-induced hyperinflation destroyed the savings of citizens preserving their wealth in the Argentintian peso and set the country into a devastating downward spiral.
Throughout the 1990s, Argentina had a law of convertibility that fixed the peso’s exchange rate at par with the U.S. dollar, meaning every peso had to be backed by a 1:1 U.S. dollar reserve ratio. This temporarily stalled inflation for about a decade, yet meant that politicians could not print exorbitant amounts of money. As a result of the government’s desire to increase spending, in 2001, they quickly enacted a series of government policies known as the Corralito. During this attack on economic freedoms in the country, the Argentinian government froze citizens’ dollar-denominated bank accounts within the banking system. Simultaneously, they altered the peso to USD exchange rate then proceeded to steal the dollars within the banking system as all were converted to Argentinian pesos under the new exchange rate, simply to finance government spending at the expense of the common citizen.
The Present Economic State Of Argentina
After the Corralito, the economy had a slight return to growth as government-imposed restrictions were slowly lifted from 2002 to 2012. In 2012, rising inflation and capital flight led to a massive decrease in the country’s dollar reserves pushing the government to enact new capital controls, specifically centered around limiting citizens’ access to U.S. Dollars. These capital controls led to a steady increase in the black market for dollars transacted outside of the traditional banking system, known as the blue dollar rate.
From 2012 to 2015, capital controls continued to be enacted under President Cristina Kirchner, leading to a steady increase in the blue dollar conversion rate. Under President Mauricio Macri from 2015 to 2018, some capital controls were lifted, decreasing the size of the black market for U.S. dollars, yet the loosening of restrictions did little to prevent a steady rise in the blue dollar rate.
In August 2019, President Macri lost the primary vote, marking an end to the free-market policies the administration had instituted. This led to a massive stock market sell-off and currency devaluation as the peso dropped 15% in a single day. In September 2019, new capital controls were instituted that prevented citizens from converting pesos to dollars at a rate that exceeded $10,000 per month. A month later, after Macri officially lost the election, citizens were limited to just $200 of dollar savings from the previous $10,000 allowed.
Under the current Alberto Fernandez administration, capital controls have been greatly increased. The administration announced after entering office in December 2019 that all purchases made in any foreign currency would be subject to a 30% tax, hampering official avenues for citizens to transact with relatively stable fiat currencies such as the U.S. dollar. As of April 2021, the government has confirmed that all capital controls will remain in place for the foreseeable future, doubling down on policies that have destroyed the free market in Argentina, devalued the peso, and forced citizens to transact on the black market to maintain any level of prosperity.
A Steady Shift Toward Bitcoin
Coinciding with the new capital controls within the country, bitcoin adoption has been steadily increasing. The amount of peer-to-peer volume within the country has significantly increased since 2018 and is continuing to maintain a consistent volume.
As seen in the chart above, the clear upward peer-to-peer volume trend beginning in early 2020 coincides with new capital controls within the country. These volumes may continue to increase as the current administration recently confirmed that all capital controls will remain in place, a move that will induce capital flight and continue to force citizens to transact outside of the traditional financial system.
On the corporate side, South American e-commerce giantMercadoLibre, headquartered in Buenos Aires, Argentina, recently disclosed a $7.8 million bitcoin purchase, with plans to hold bitcoin on their balance sheet. The company has accepted bitcoin for payments since 2015, as a result of South American customers being relatively financially disadvantaged and effectively being forced to rely on bitcoin as a reliable payment method.
Bitcoin Can Empower Argentinians
Argentinians have been consistently robbed of their ability to preserve capital within their own country. Dramatic domestic inflation as a result of government money printing and heinous economic policies have forced citizens to abandon the peso for the U.S. dollar. Yet, in an attempt to finance government spending, citizens have had the only reliable form of currency outright stolen from them time and time again.
On the surface, bitcoin is the best savings technology in the world, providing an avenue for the citizens of Argentina to preserve their wealth in a perfectly constructed deflationary piece of technology. This is not bitcoin’s only usage for the economically disadvantaged citizens of Argentina; bitcoin cannot be censored or confiscated regardless of government intervention. This facet alone will allow Argentinians to prosper outside of the arms of a corrupt government that has consistently shown a disregard for the well-being of its citizens.
Bitcoin does not align with the goals and incentive structure of the Argentine government, but fills the goals of the average citizen to perfection. Argentinians now have the ability to opt out of a system that has treated them unfairly for decades.
Government authorities in Argentina are requiring cryptocurrency exchanges in the country to provide monthly data on users and transactions.
Despite various anti-free market policies discouraging bitcoin use in Argentina, adoption has continued to accelerate in the capital control-stricken country. In the government’s most recent move, the Federal Administration of Public Revenue (AFIP), essentially the Argentinian version of the Internal Revenue Service (IRS), has ordered all cryptocurrency exchanges operating within the country to file comprehensive transaction data on their customers every month, according to a report from local outlet Bae Negocios.
The agency is requiring all exchanges to identify all of their clients, as well as all modifications that occur for all accounts. Paired with this massive information grab, exchanges must report total income as well as final account balances to the AFIP by the fifteenth of every month.
For decades, the people of Argentina have been hit by strict capital controls and dramatic inflation spirals, hampering their ability to preserve capital. Citizens have opted to denominate their wealth in the U.S dollar, the global reserve currency, yet have essentially been stripped of that ability through recent strict government policies.
Bitcoin provides a safe haven for the citizens of Argentina to store their wealth in a deflationary asset that is censorship-resistant, cannot be confiscated and operates outside the far-reaching arms of all government entities. The AFIP’s attempt to access all user information on regulated bitcoin exchanges will ultimately prove futile, as it will only incentivize users to use peer-to-peer Eexchanges, hold their own private keys and become increasingly vigilant when conducting transactions.
The Argentinian government has suppressed its citizens’ ability to store wealth in all fiat currencies, but no policy will be able to stop the unstoppable monetary force that is Bitcoin.
Bitcoin will empower individuals and check all authoritarian government agencies.
“In February 2021, we invested $170 million in bitcoin as we believe cryptocurrencies are an instrument of economic empowerment, which aligns with the company’s purpose” per the earnings report.
With this $170 million purchase, the company bought an additional 3,318 bitcoin at an average price of $51,235.68 per bitcoin. This supplemented Square’s initial purchase of 4,709 bitcoin for $50 million that the company announced in October 2020, which are now worth approximately $263.2 million at the time of writing. The company currently holds 8,027 bitcoin, worth approximately $448 million, giving it the third-largest bitcoin holdings of any publicly-traded company.
“We see bitcoin as the internet’s potential to have a native currency, and we want to further that as much as we can,” Jack Dorsey, Square’s CEO, said during an earnings call. “Our focus is enabling bitcoin to be the native currency, it removes a bunch of friction for our business and we believe fully that it creates more opportunities for economic empowerment around the world.”
Square generated a staggering $3.51 billion in bitcoin revenue during the first quarter of 2021, along with $75 million of bitcoin gross profit, each up approximately 1,000% year over year. The company’s gross profit was $964 million, up 79% year over year.
Cash App, Square’s payments app and bitcoin sales portal, also had phenomenal growth this quarter, finishing with $495 million in gross profit, up 171% year over year.
At the end of the quarter, Square had $4.8 billion in available liquidity, with $4.3 billion in cash and cash equivalents, paired with $500 million available to withdraw from the company’s revolving credit facility.
In the future, Square will continue to provide bitcoin services to customers and hold bitcoin as an instrument for economic empowerment, putting itself ahead of competitors.