Microstrategy, a Nasdaq-listed software firm, has denied rumors that it is under a margin call for a Bitcoin-backed loan. He will have to sell some coins. The executive said that if the price of cryptocurrency falls below $3,562, the company could offer other collateral.
Microstrategy CEO Michael Saylor dispelled the rumor that his firm is in danger of having to liquidate bitcoins to pay a margin call for bitcoin-backed loans. After the weekend’s sell-off, the price of BTC continued falling.
Saylor, however, tweeted Tuesday:
Microstrategy used a Bitcoin strategy to anticipate volatility and structure its balance sheet to allow it to weather any adversity.
Microstrategy’s Q1-2022 presentation explains that the company borrowed $205 million against 19,466 Bitcoins to pay for a term loan.
In a May 10 tweet, Saylor stated that Microstrategy needed to “maintain $410 million as collateral” in order to obtain this loan.
Microstrategy Q1 2022 Bitcoin holdings. Source: Microstrategy
Microstrategy currently holds 115,109 Bitcoin. Macrostrategy is also holding 14,109 BTC. This brings its group to 129.218 Bitcoins.
Phong Le, the president of Microstrategy, stated in May that if bitcoin’s price drops below $21K, it would trigger “margin calls.” This could usually be fulfilled by Microstrategy providing additional capital or liquidating the loan collateral.
This week, bitcoin’s price fell below $21K. Microstrategy said Tuesday to Reuters that it had not been given a margin call.
To maintain the required loan to value ratio, we can always add bitcoins.
Saylor also explained that Microstrategy has 115,109 Bitcoins which can be used to cover $410 million of collateral, down to the BTC price $3,562. The executive explained that Microstrategy could also post collateral if the crypto price falls even lower.
Microstrategy can pledge 115,109 Bitcoin. The company can pledge collateral if BTC drops below $3,562.