Strategy chairman Michael Saylor shared what he describes as a “digital credit theory,” a new financial approach based on Bitcoin (BTC).
According to Saylor, the model is based on creating a pool of appreciating capital through Bitcoin and issuing loans using these assets as collateral.
Saylor stated that the first step of the model is to create a capital pool that appreciates in value, and suggested using Bitcoin for this purpose. Once this capital pool is created, he explained, the company could issue loans that are overcollateralized by its equity base. He added that this loan structure could be provided through one of the company’s products, a financial instrument called STRC.
In the third phase of the model, Saylor stated that a portion of the increase in Bitcoin’s value could be converted into cash and used for dividend financing, adding that this could be done through direct sales or derivative instruments. He argued that company shares and derivative markets could also play a role in this process.
According to Saylor, this structure creates different risk and return profiles between loan investors and equity investors. Saylor argues that loan investors achieve more stable cash flow and relatively low volatility, while equity investors gain stronger performance potential in exchange for higher volatility.
*This is not investment advice.
