As bitcoin prices continue to plummet, according to Bitcointreasuries.net, which monitors the bitcoin holdings of publicly traded companies, the U.S. business software company MicroStrategy, which is the dominant bitcoin holding of publicly traded companies, currently holds 129,218 bitcoins, with a purchase cost of $3.96 billion, but these bitcoins The current value is only $2.63 billion and has floated a loss of up to $1.33 billion.
Notably, according to Bloomberg, because MicroStrategy had used the company’s massive bitcoin holdings as collateral to secure a $205 million term loan from cryptocurrency-friendly bank Silvergate Bank back in March of this year, the bitcoin collateral, which was initially worth $820 million, has now fallen in value by more than half and could therefore trigger a margin call.
However, according to Reuters, MicroStrategy 14 cleared up any doubts about the need for a margin call, stressing that the company has not yet received a margin call and noting that it has plenty of additional collateral to pledge if necessary.
MicroStrategy said: Despite the recent volatility in bitcoin prices, MicroStrategy has not yet received a margin call against our Silvergate loan. We can always provide additional bitcoin to maintain the required loan-to-value ratio…Even at current prices, we continue to maintain a sufficient amount of additional unpledged bitcoin that can satisfy our requirements under the loan agreement.
MicroStrategy Executive Michael Saylor also released a statement to Bloomberg stating: As long as the loan-to-value (LTV) ratio for Silvergate loans is below 50%, there is no requirement for additional margin. We will manage accordingly.
Meanwhile, Seiler announced on Twitter on the 14th that MicroStrategy will continue to hold Bitcoin: MicroStrategy adopted the Bitcoin strategy in anticipation of its volatility and built its balance sheet so that it could continue to HODL through adversity.
In this tweet, Seiler cites a tweet he made on May 10. The tweet mentions that MicroStrategy has a $205 million term loan that needs to maintain $410 million worth of collateral, and that MicroStrategy has a whopping 115,109 bitcoins to pledge, and that the company may only provide some other collateral if bitcoin drops to $3,562.
No Risk of Margin Call for Now
BTIG analyst Mark Palmer told Bloomberg that MicroStrategy should still have enough bitcoin to meet any margin calls, as the company still has more than 95,000 bitcoins available for collateral, and MicroStrategy is required to keep its loan-to-collateral ratio at 50 percent or less and have at least $4.1 billion worth of bitcoin in an escrow account.
Mark Palmer did point out some problems, however, noting the lack of a liquidation clause in the loan agreement and the amount of confusion. microStrategy currently has about $2.2 billion in debt, has annual interest expenses of about $44 million and is expected to generate $90 million in free cash flow in 2022, Mark Palmer added.
According to Tradingview, MicroStrategy shares have been performing quite poorly recently. After adopting the Bitcoin strategy, MicroStrategy shares once climbed to an all-time high of $1,307 in February 2021, but have been on a downward spiral since then, and have accelerated their decline since last November.
Despite the plummeting price of bitcoin, Sellers is still confident in bitcoin, and he said in an exclusive interview with TheBlock in early June that once one really understands the fundamentals of cryptocurrency, and how difficult it is to create something better, then bitcoin’s recent volatility is largely irrelevant.
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