Worlds Collide: Bond Issuance and Bitcoin Buying

At last, my worlds have collided. No, not in the way they collided for social miscreant George Costanza, but rather in a beautiful and harmonious way. Software company MicroStrategy will soon issue a $400 million bond in order to purchase Bitcoin only weeks after it converted $250 million of its treasury reserves from dollars to Bitcoin. And with that, the bond markets and the Bitcoin market will merge, and the two parallel careers I’ve built for myself will suddenly become one.

Bonds and Bitcoin

Corporate New Issuance

Anticipating Fireworks

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Even more interesting than the BTCUSD price impact of MicroStrategy’s bond issuance is the linkage between the bond and Bitcoin markets that will undoubtedly blossom as a result. Just as corporate new issue and interest rate swap markets are linked (a process called rate-lock explained here), corporate new issue and Bitcoin markets will now be linked going forward. Investment banking trading desks will be forced to offer clients financial products that allow Bitcoin hedging and conversion for clients looking to replicate MicroStrategy’s effort. By converting a balance sheet liability (its bond offering) into Bitcoin as an asset, the company is betting that its cost of borrowing will pale in comparison to the time value of money associated with holding Bitcoin. And the world will be watching to see the result.

Layered Money

I spent this year weaving both of my worlds into one because the blurred line between Bitcoin and macroeconomics frankly disappeared in 2020. I did this by writing a book about the international monetary system that includes a vision of the future with Bitcoin at the center. Bitcoin won’t replace all currency on this planet, but it will serve as the reserve asset of all digital currencies just as it serves as the reserve currency in the cryptocurrency world today. Central banks are about to launch their own crypto-competitors, and banks will certainly follow suit in order to stay relevant in the rapidly changing monetary environment. But all new digital currencies, from central banks and banks alike, will eventually face final settlement versus BTC as the only digital currency on our planet immune to supply manipulation. I am beyond excited to share my vision for our monetary future in only a few weeks: Layered Money will be available on Amazon worldwide on January 26, 2021. The Kindle version can be pre-ordered here, and print and audio versions will be available on the release date. Please visit my website for more information and follow me on Twitter.

bitcoin-native financial theory, adjunct professor of finance and business economics @USCMarshall