Willl MicroStrategy Debt Lead to Bankruptcy? Scaramucci Weighs

YEREVAN (CoinChapter.com) —  Anthony Scaramucci, founder of SkyBridge Capital, dismissed concerns about MicroStrategy Inc.’s significant Bitcoin investments and its leveraged debt strategy. Speaking in an interview with Bloomberg, Scaramucci called these fears overstated and explained why the company’s financial approach is sustainable.

“People think if Bitcoin crashes, he is going to implode, and as a result, leverage will unwind in the system, causing a collapse,”

Scaramucci said on Dec. 20.

He noted that Michael Saylor’s balance sheet relies on long-term debt, which can withstand short-term Bitcoin volatility. Scaramucci emphasized that only a prolonged Bitcoin decline over six or seven years could significantly impact MicroStrategy.

MicroStrategy’s Debt Structure Explained

MicroStrategy has raised $7.2 billion in convertible debt, with $6 billion of it issued this year. The company has used these funds to buy substantial amounts of Bitcoin, making it a major corporate Bitcoin holder.

The convertible debt has attracted hedge funds, which leverage these securities for market-neutral arbitrage strategies. While some analysts have raised concerns about the risks associated with Bitcoin price drops, Scaramucci argued that MicroStrategy’s financial structure is sound.

“The narrative of him being forced to sell hundreds of thousands of tokens into the market, I think it’s a forced narrative,”

Scaramucci said.

Drawing from his 35 years of Wall Street experience, he highlighted differences between MicroStrategy’s structured debt and the high-risk models that caused the collapse of companies like Lehman Brothers.

SkyBridge Capital Lists MicroStrategy as Key Holding

SkyBridge Capital, through its First Trust SkyBridge Crypto Industry and Digital Economy ETF, includes MicroStrategy among its top-three holdings. Scaramucci highlighted this investment as part of his firm’s confidence in the company’s long-term Bitcoin strategy.

Michael Saylor, who contributed to Scaramucci’s book on Bitcoin, has strategically issued debt and equity to acquire Bitcoin. “He’s created this positive flywheel by issuing debt and equity,” Scaramucci explained, noting that the strategy allows MicroStrategy to maintain growth while managing its financial obligations.

Bitcoin Price Fluctuations Add to Market Uncertainty

Bitcoin recently hit an all-time high of over $108,000 but has since retreated. While some predict continued growth for the cryptocurrency, its price remains unpredictable.

Scaramucci acknowledged the potential for a 30%-40% correction, which could bring Bitcoin to $60,000-$70,000. He added that Bitcoin’s value is supported by the introduction of exchange-traded funds and favorable regulatory developments, keeping its price above $50,000.

With a current market capitalization of $1.9 trillion, Bitcoin remains a dominant player in the cryptocurrency market. Scaramucci pointed out that Bitcoin could eventually reach a market cap of $18 trillion.