Microstrategy Could Get a Margin Call if Bitcoin Drops to $21k, But the Company is Prepared

Summary:

• Michael Saylor’s Microstrategy could look a borderline telephone connected its indebtedness if Bitcoin drops beneath $21k
• However, the institution is prepared to adhd backing to their existing position
• Microstrategy precocious secured a indebtedness of $205 cardinal successful precocious March, payable monthly opening this period till March 2025
• Microstrategy present holds 129,218 Bitcoins with a cumulative impairment nonaccomplishment of $1.071 billion

The concern quality and analytics institution of Microstrategy could beryllium acceptable to person a borderline telephone connected its indebtedness if Bitcoin (BTC) drops beneath $21k. This is according to the company’s CFO, Phong Le, during the company’s most caller net call.

Mr. Le was responding to a question by Microstrategy’s Senior Director, Treasury and Investor Relations, Shirish Jajodia, who asked however acold Bitcoin had to autumn for the institution to person a borderline telephone connected its $205 cardinal indebtedness from Sivergate Bank. Mr. Le responded that BTC had to driblet to $21k, but the institution was acceptable to lend much to its existing position. He said:

We took retired the indebtedness chiefly truthful that we could proceed to put much successful Bitcoin and besides truly to make a marketplace for a Bitcoin-backed word loan…

As acold arsenic wherever Bitcoin needs to fall, we took retired the indebtedness astatine a 25% LTV, the borderline telephone occurs 50% LTV. So essentially, Bitcoin needs to chopped successful fractional oregon astir $21,000 earlier we’d person a borderline call.

That said, earlier it gets to 50%, we could lend much Bitcoin to the collateral package, truthful it ne'er gets there, truthful we don’t ever get into a concern of March telephone also.

Microstrategy’s $205 Million Loan Matures successful March 2025

The indebtedness successful question from Silvergate slope is worthy $205 cardinal and bears involvement astatine a ‘floating complaint adjacent to the Secured Overnight Financing Rate 30 Day Average arsenic published by the Federal Reserve Bank of New York’s website positive 3.70%, with a level of 3.75%’

It is besides payable monthly successful arrears opening May 2022 and volition mature successful March 2025 unless earlier repaid per its terms.

Microstrategy Owns 129,218 Bitcoin with a Cumulative Impairment nonaccomplishment of $1.071 Billion

At the clip of writing, Microstrategy owns 129,218 Bitcoin. According to the company’s first-quarter fiscal results of 2022, the company’s holdings of Bitcoin person a ‘cumulative impairment losses of $1.071 cardinal since acquisition and an mean carrying magnitude per bitcoin of astir $22,409.’

[Feature representation courtesy of Michael Saylor connected Twitter]