Even while MicroStrategy’s CEO remains optimistic despite the crypto market’s current dire condition, these times have proven to be the most agonizing for all stakeholders, including the software company.
Michael Saylor, the chief executive officer of MicroStrategy, tweeted on June 14 to allay concerns that his company’s Bitcoin holdings may be about to cost them dearly. Saylor asserts that the company can withstand future BTC price declines, even if the cryptocurrency falls below $3,500.
The continuous market pandemonium has prompted the crypto bull to announce publicly that his software company is not at risk of liquidation. The financial ledgers of MicroStrategy appear to support his argument.
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The crypto market’s decline, which began in April, dragged on over the weekend, shedding 13 percent of its value over the past 24 hours. Since Friday, the value of leading cryptocurrencies Bitcoin and Ether has decreased by 15 percent and 26 percent, respectively.
Bitcoin is currently trading at $20,253, a decrease of 35.1% for the past week, while Ethereum is trading at $1,029, a decrease of 43.2% in the same timeframe, according to Coingecko data published Wednesday.
MicroStrategy Saw It Coming And Doesn’t Flinch
Saylor stated that his company was prepared for Bitcoin’s volatility when it initially selected a crypto strategy and had the ability to endure it.
MicroStrategy’s 129,218 BTC inventory is now being held at a net loss of $1.06 billion, according to the tracking resource Bitcoin Treasuries. This represents around two-thirds of the token’s total market value.
Saylor has maintained that MicroStrategy is taking a long-term stance on its Bitcoin assets in reaction to market turbulence.
“When the company chose a #Bitcoin strategy, it expected volatility and built its balance sheet so that it could continue to #HODL through hardship,” Saylor said, alluding to the “HODL” meme, which refers to “holding” onto coins during difficult market conditions.
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Loan Condition: Initiate Margin Call
MicroStrategy has acquired a huge Bitcoin hoard and borrowed $205 million from the crypto bank Silvergate Capital using 19,466 Bitcoins as security. The terms of the loan require Saylor’s company to initiate a margin call if Bitcoin falls below $21,000.
Saylor pointed out that they began with $5 billion in unpledged collateral and borrowed $200 million against it, resulting in a 4 percent loan-to-value ratio. He noted that if Bitcoin’s price falls by 95 percent from its current level, “we would have to submit extra collateral.”
MicroStrategy is the biggest 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