Japan and the crypto industry put on a crazy show this week. What presented itself as a simple announcement of innovation on the part of Metaplanet was not one, given the conditions in which it took place. First, there was the presentation of a bond program called “BitBonds”. An almost unprecedented operation, if we do not scratch the varnish to discover what is hidden behind the curtain: 1.4 billion in latent losses, unsecured obligations and a movement of bitcoins which is not very reassuring. Bitcoiners were left breathless without the intervention of the CEO.
In brief
- Metaplanet raised 200 million yen (US$1.3 million) via four rounds of BitBonds at 4.0-4.3% over three years.
- CEO Simon Gerovich denied any sales after the transfer of 5,014 BTC, a routine operation that cost $8 in fees.
- The company holds 43,000 BTC with an unrealized loss of $1.4 billion, with its average purchase price being $96,191.
- BitBonds are unsecured and expose creditors to the volatility of bitcoin, as recognized in Metaplanet’s official prospectus.
BitBonds: Metaplanet takes on the bond market
Metaplanet boasts 43,000 BTC in its vault, far behind Strategy and its 840,447 bitcoins. But this sum is more than enough, in the eyes of its leaders, to go beyond the simple accumulation phase. Now, time for derivative products. It is therefore no longer surprising to see Metaplanet unveil a continuous bond issuance program called “BitBonds”. More specifically, four series of BitBonds will enter the credit market, for a total amount of 200 million yen, i.e. 1.3 million US dollars.
The distribution of BitBonds is the responsibility of the authorized subsidiary Metaplanet Securities. Annual coupons of 4.0 to 4.3%, maturing in three years, will flood the market. It should also be noted that Metaplanet will borrow at a fixed rate to finance its bitcoin strategy. A replica of Strategy’s modus operandi, with founder Michael Saylor at the head, but with a Japanese touch?
The logic is easily understood: Metaplanet is targeting 100,000 BTC by the end of 2026, then 210,000 by the end of 2027. With a fixed return, Japanese investors, thirsty for yield in a country where rates are becoming positive again, will make short work of it. Although the need for a continuous flow of funding could turn into additional pressure for the actors concerned.
Technical challenges and contradictions
Considered a financial UFO, BitBonds have worrying shortcomings: they are unsecured, unrated bonds, not backed by bitcoin. In reality, it is the “general credibility” of the company, a large holder of BTC, which is involved. From there arise questions about the very nature of the debt.
Our world is in search of value capable of influencing collective belief. But Metaplanet persists and signs. In its prospectus, the company acknowledges that its repayment capacity remains materially affected by movements in the price of bitcoin.
The Bonds are senior unsecured, unsecured and unrated bonds. They do not benefit from any protection from the principal. Payment of principal and interest depends on the creditworthiness of the Company, and the financial condition and results of operations of the Company may be materially affected by movements in the price of Bitcoin, its principal asset.
In other words, creditors will lend at a fixed rate, but will bear a credit risk correlated to the volatility of the queen of cryptos. A complex mechanism for bonds placed privately via Metaplanet Securities, without an organized secondary market. To drive home the point, the liquidity of BitBonds does not benefit from any guarantee, and their resale before maturity promises to be difficult. The expansion project towards public offerings and tokenization, envisaged by Metaplanet, turns out to be less dissuasive than it seems.
It should also be mentioned that the first BitBonds differ significantly from previous promises of bonds backed by bitcoins or based on stablecoins. The crypto community never stops wondering about the philosophy of Metaplanet.
Sale of bitcoins: the rumor, the denial and the real clarification
The launch of BitBonds was not without hiccups. The day before his presentation, on August 12, news panicked the cryptosphere. Analysts detected a massive movement of 3,881 BTC, then 5,014 BTC from Metaplanet wallets.
This type of operation never leaves observers unmoved: the volatility of bitcoin and other cryptos depends on it. Weren’t questions asked recently when MARA Holdings and Strategy sold part of their digital assets? The CEO, Simon Gerovich, had to play firefighters announcing that “ no bitcoin has been sold, and our holdings remain at 43,000 BTC “.
He even took the opportunity to publish all the addresses of Metaplanet, in order to put out the fire. The demonstration will have rather benefited the Bitcoin network: only 8 dollars in fees to move 322 million dollars. Traditional banks have taken it for granted.
However, such an operation should not be done lightly, when we observe this type of movement in the crypto industry. A crisis of confidence inevitably looms. Especially since Metaplanet shows an unrealized loss of $1.4 billion on all of its acquisitions. Its bitcoins, acquired at an average price of $96,191 per piece, are melting in the sun compared to a current BTC price of $63,800.
BitBonds: financial genius or strategic imprudence?
This news places Metaplanet at a crossroads. First, let’s not forget that this Japanese company has a well-stocked vault of bitcoins. It is even said to be the third largest holder of BTC in its category. Then, let us remember that many Japanese investors will not shy away from BitBonds with a 4% yield, in a market where rates are becoming positive again. Will these bonds be snapped up like hot cakes, despite the systemic risk – knowing that a solvency problem awaits Metaplanet in the event of a collapse of bitcoin?
Certainly, Gerovich intervened, but analysts are not being fooled: unrealized losses of more than $1 billion, a stock that has lost nearly 43% in one year… Metaplanet’s credibility seems more fragile than ever. What is the foundation of the company? Probably on a more lenient future for bitcoin, relaxed regulation and ever more daring investors.
All in all, BitBonds constitute a daring bet on the part of Metaplanet, despite the reckless nature of the decision. But the wait for bitcoin to wake up is proving to be longer than expected: even the slowdown in American inflation has not had the expected effect.
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