Earlier last month, MicroStrategy CTO Phong Lee assured concerned shareholders that the largest holder of Bitcoin among listed companies had nothing to worry about as another Crypto Winter approached. . “Essentially, Bitcoin needs to be cut in half, or about $ 21,000, before it has a margin call,” Lee told investors in a quarterly earnings call.
It seems that the day before unthinkable has already arrived.
In the early hours of this morning, the price of Bitcoin fell slightly below $ 21,000, reaching a low of 52 weeks, before recovering to a price of $ 22,260 at the time of writing. The fall in prices marks a major line in the sand for MicroStrategy, which took out a $ 205 million loan in March from Silvergate Bank to store Bitcoin. If BTC falls and stays below $ 21,000, the event would trigger a margin call on the MicroStrategy loan, a potentially disastrous event that would require the company to download tens of thousands of Bitcoins to the already bear market. According to the company’s latest earnings report, MicroStrategy currently has 129,218 BTC.
And yet this morning, MicroStrategy CEO Michael Saylor took to Twitter to redouble his company’s Bitcoin game, stating that he and MicroStrategy are ready to withstand this market storm and the futures of many more serious:
The Silvergate loan requires $ 410 million in collateral. For Saylor, even if the price of Bitcoin settles below $ 21,000, triggering a margin call on the loan, MicroStrategy has enough extra BTC for collateral. Only if the price of Bitcoin fell below $ 3,562 would this additional supply of BTC be insufficient to secure the loan. Saylor has previously stated that in this event, MicroStrategy has more guarantee at its disposal.
Give me a lever long enough and #bitcoin to put it on, and I’ll move the world.
– Michael Saylor⚡️ (@saylor) March 29, 2022
The fact that, just a month ago, the CTO of MicroStrategy tried to convince shareholders that today’s events would never come, speaks of the current volatility of the cryptocurrency market and the unpredictability of when it will reach the bottom.
If the price of Bitcoin fell low enough for MicroStrategy to be unable to keep $ 410 million in collateral for the loan, the company would be forced to start selling large amounts of Bitcoin at once to pay off the loan, an event that would likely fall even more so. the price of the cryptocurrency and potentially send disastrous effects to the entire wider cryptocurrency market.
Saylor and MicroStrategy remain assured, at least publicly, that such a day will never come. The market seemed to buy it: the company’s shares have risen nearly 3% today, after plummeting 54% during last month’s cryptocurrency crack.
Want to be an expert in cryptography? Get the most out of Decrypt right in your inbox.
Get the most important cryptography news + weekly summaries and more!