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Michael Saylor reassures investors after the slump: More than enough Bitcoin (BTC) available

 

MicroStrategy CEO and well-known Bitcoin proponent Michael Saylor is confident that his company's BTC holdings can easily cover a potential margin call on Bitcoin-backed loans.


The business intelligence firm has made waves in 2021 with several major investments in Bitcoin. Saylor was particularly instrumental in getting MicroStrategy to invest its financial reserves in BTC.


Global markets posted significant losses in early May and Microstrategy stock was no exception. The price of MSTR has fallen by 24 percent and Bitcoin and the cryptocurrency market as a whole have also collapsed.


This is worrying because in March 2022, MacroStrategy's subsidiary borrowed $205 million from Silvergate Bank, using some of MicroStrategy's bitcoins as collateral. MicroStrategy then used the money to buy more BTC.


If BTC price falls too much, it would trigger a so-called margin call on the Silvergate loan as the value of the asset used as collateral declines. A margin call means that MicroStrategy must provide additional security. In this case, that would be more bitcoins. This situation was a key topic at the quarterly earnings conference in May. Phone Le's chief financial officer stated that the company would have to sell some bitcoin if the BTC price fell below $21,000.




Saylor reassured investors on Twitter May 10 that the company was able to pay off its debt. The $205 million loan taken out by MacroStrategy required $410 million in collateral. 115,109 BTC are available as further collateral. Saylor stated that Bitcoin must fall below $3,562 for the company to run out of BTC to further collateralize the loan.


In August 2021, the company caused a stir when it announced that it would invest a large part of its capital directly in Bitcoin. First, the company bought $250 million worth of Bitcoin after fulfilling its obligations to shareholders. This allowed the company to buy 21,454 BTC.


At the time, Saylor said the company believed Bitcoin was "a reliable store of value and an attractive investment asset with greater long-term appreciation potential than cash."


He also emphasized that Bitcoin is a better investment than holding fiat currencies and that the company has made Bitcoin a primary part of its reserve strategy.


MicroStrategy bought another 16,796 bitcoins in September 2021 for a total of $175 million. The firm has been buying BTC on and off since then . That even prompted CitiBank to downgrade MicroStrategy's stock from neutral to sell .

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