Michael Saylor, CEO of MicroStrategy is confident that his company’s BTC holdings will more than cover any prospective margin call on Bitcoin-backed loans.
In 2021, the American corporate intelligence and software behemoth made headlines by making a series of significant Bitcoin bets. MicroStrategy’s decision to convert its treasury reserve into BTC assets was influenced by Saylor.
In early May, global markets suffered significant losses, and Microstrategy’s stock was not spared. The value of $MSTR has dropped by 24%, and the value of Bitcoin has also dropped significantly, along with the larger cryptocurrency markets.
This is concerning because MacroStrategy, the company’s subsidiary, took out a $205 million loan from Silvergate Bank in March 2022, with a portion of MicroStrategy’s Bitcoin used as collateral. The funds were subsequently used to continue MicroStrategy’s BTC acquisition strategy.
If the price of Bitcoin falls too low, the Silvergate loan will be called due to the value of the collateralized asset falling.
It was a hot topic on the business’s May earnings call, with CFO Phone Le admitting that the company would have to sell some Bitcoin if the price fell below $21,000.
On May 10, Saylor turned to Twitter to reassure investors about MacroStrategy’s capacity to repay its loans, which required $410 million in collateral.
Saylor highlighted that the firm would have to run out of BTC if the value of Bitcoin fell below $3,562 in order to run out of collateral to service the loan.
The corporation made headlines in August 2021 when it decided to invest a significant percentage of its capital in Bitcoin.
It made its initial $250 million investment after meeting its shareholder responsibilities, giving the business 21,454 BTC for its treasury holdings.
Saylor stated at the time that the investment was motivated by the company’s opinion that Bitcoin is “a dependable store of wealth and an appealing financial instrument with greater long-term appreciation potential than holding cash.”
Saylor was even more adamant, insisting that Bitcoin was a better investment than fiat currency and that the corporation had made Bitcoin its primary asset in its treasury reserve plan.
In September 2020, MicroStrategy made another significant Bitcoin purchase, this time for $175 million, adding another 16,796 Bitcoin to its portfolio.
From there, the company proceeded to buy BTC, prompting CitiBank to downgrade MicroStrategy’s shares from ‘neutral’ to ‘sell’ following its intention to make Bitcoin its principal treasury reserve asset.
