Even though the CEO of Microstrategy remains optimistic despite the current dire situation in the crypto market, this time has proved to be the most painful for all stakeholders including the software company.
MicroStrategy CEO Michael Sayer tweeted on June 14 to allay concerns that his company’s bitcoin holdings could cost him dearly. Sailor claims that the company could face a drop in BTC price in the future, even if the cryptocurrency falls below $3,500.
The continuing market pandemic has prompted crypto bulls to publicly announce that their software company is not at risk of liquidation. MicroStrategy’s financial leaders seem to support his argument.
Reading Tips | Crypto Companies Are Asking Employees to Pack Up, But Binance Is Hiring – Here’s Why
MicroStrategy is the biggest publicly listed independent business intelligence software firm in the US. Image: CryptoPotato.
The cryptocurrency market’s decline, which began in April, dragged on over the weekend, losing 13% of its value over the past 24 hours. Since Friday, the major cryptocurrencies Bitcoin and Ether have lost 15% and 26% respectively in value.
According to data from Coingecko published on Wednesday, bitcoin is currently trading at $20,253, a decrease of 35.1% over the past week, while Ethereum is trading at $1,029, a decrease of 43.2% over the same time frame.
MicroStrategy saw it coming and it doesn’t budge
Sayler said that his company was prepared for the volatility of bitcoin when it initially selected a crypto strategy and was able to tolerate it.
According to tracking resource Bitcoin Treasury, MicroStrategy’s 129,218 BTC inventory is now at a net loss of $1.06 billion. This represents about two-thirds of the token’s total market cap.
Saylor has said that Microstrategy is taking a long-term stance on its bitcoin assets in response to the market turmoil.
“When the company chose the #Bitcoin strategy, it anticipated volatility and built its balance sheet so that it could continue to #HODL through the hardships,” Sailor said, alluding to the “HODL” meme that coined Refers to “holding on”. Tough market conditions.
Reading Tips | Microstrategy Bitcoin Bet Backfires, Holding Losses Near $1 Billion – Now What?
Crypto total market cap at $846 billion on the daily chart | Source: TradingView.com
Loan Condition: Initiate Margin Call
MicroStrategy has acquired a large stockpile of bitcoins and borrowed $205 million from crypto bank Silvergate Capital using 19,466 bitcoins as security. If bitcoin falls below $21,000, the terms of the loan require Saylor’s company to initiate a margin call.
Sayer reported that he started with $5 billion without mortgages and borrowed $200 million against it, resulting in a 4 percent loan-to-value ratio. He added that if the price of bitcoin drops by 95% from its current levels, “we will have to deposit additional collateral.”
MicroStrategy is the largest publicly listed independent business intelligence software firm in the US. In August of 2020, it began investing in cryptocurrencies as a Treasury reserve asset, citing a sinking US currency and global macroeconomic issues.
Featured image from Crypto News, chart from TradingView.com