The Fed has a stake in an exchange-traded fund that owns company bonds.
MicroStrategy deposited bonds for 500 million dollars to invest in bitcoin.
The US Federal Reserve, the Fed, would have an indirect supportive stance in the seven-year bonds managed by MicroStrategy and the proceeds of which will help the company set future investments in bitcoin (BTC). The central bank would be the fourth-largest owner of an exchange-traded fund or ETF that holds 1% of its portfolio in such bonds.
At the end of March last year, and as an emergency measure following the COVID-19 pandemic, the bank introduced capital into the SPDR Bloomberg Barclays High Yield Bond. The measure was part of a strategy to reactivate markets in the face of the emergency crisis and the freezing of credit markets, according to a report made by Bloomberg.
Now, this fund, identified with the JNK ticker, is one of the owners of the debt securities that MicroStrategy got to manage last Tuesday to purchase bitcoin. In simpler words, the Fed, if it kept holding the ETF, would have helped indirectly with the investments that the business intelligence company has been applying with the main cryptocurrency since last year.
Athanasios Psarofagis, ETF analyst for Bloomberg Intelligence said on the matter: “It’s a pretty small amount, but to be honest, I’m surprised to see this happening there so soon. Fixed income portfolio managers have a bit of discretion over which bonds they can hold in their portfolio, so they might be adding a minimal portion before possible index inclusion.”
Federal Reserve and Bitcoin’s differences
The fact is catching unexpected attention since the Federal Reserve has been one of the most skeptical entities regarding the main cryptocurrency. In June of last year, a group of economists from the bank assured that BTC was not a new form of money, but that it was any other fiat money.
Fed Chairman Jerome Powell explained in a statement during March this year that bitcoin was not a candidate to replace the dollar as a store of value currency. For the executive, bitcoin has the potential to become a substitute for gold, but not for the US currency.
According to the report, the Fed would also have a stake in the iShares Broad USD High Yield Corporate Bond, another ETF that owns debt securities handled by MicroStrategy. This policy about printing more money to inject into the markets is one of the main reasons that would be making ups and downs in cryptocurrencies’ prices, a fact recognized by Powell himself.
MicroStrategy is one of the biggest companies that has set large investments in bitcoin. The company has used its resources and debt issues to purchase more BTC, something that is attracting more and more media attention worldwide. According to the records of Bitcoin Treasuries, the organization keeps in its treasury more than 92,000 bitcoins.
By: Jenson Nuñez
