Michael Saylor Reassures Investors After Market Plunge Hurts MSTR and BTC

MicroStrategy CEO and Bitcoin proponent Michael Saylor believes his firm’s BTC holdings will exceed potential margin calls on Bitcoin-backed loans.

The American business intelligence and software giant made headlines in 2021 with several major investments in Bitcoin. Saylor was the driving force behind MicroStrategy’s decision to convert its treasury reserves into BTC holdings.

Global markets suffered heavy losses in early May, and Microstrategy stock was not immune. MSTR has seen its 24% drop in value Along with the broader cryptocurrency market, Bitcoin’s value has also fallen sharply.

That’s worrying because the company’s subsidiary, MacroStrategy, has taken a $205 million loan from Silvergate Bank March 2022, with a portion of MicroStrategy’s Bitcoin used as collateral for the debt. MicroStrategy then uses the proceeds to continue the company’s BTC acquisition strategy.

If the price of BTC falls too low, this will trigger a margin call on the Silvergate loan as the value of the collateral asset falls.This is a focal point for the company May earnings conference call — The company’s CFO, Phone Le, confirmed that it will have to sell some bitcoins if the price of BTC falls below $21,000.

Saylor took to Twitter on May 10 to reassure investors that the company was able to service its debt, with MacroStrategy’s $205 million loan requiring $410 million in collateral. Saylor noted that with 115,109 bitcoins as further collateral to pledge to repay the loan, the value of bitcoins would have to fall below $3,562 before the company could run out of bitcoins to further back the loan.

related: MicroStrategy CEO Won’t Sell $5B of BTC Stash Despite Crypto Winter

August 2021, The company makes waves Because it decided to allocate a sizable portion of its capital directly into Bitcoin holdings. Its initial $250 million investment was made after fulfilling its obligations to shareholders, giving the company 21,454 BTC for its treasury assets.

At the time, Saylor said the investment was driven by the firm’s belief that bitcoin is “a reliable store of value and an attractive investment asset with a greater potential for long-term appreciation than holding cash.”

Perhaps more underscoring, Saylor insists that Bitcoin is an investment superior to holding fiat currencies, and that the firm has made Bitcoin a major holding in its treasury reserve strategy.

Micro strategy make another major acquisition Bitcoin in September 2020, with an additional 16,796 BTC at a total purchase price of $175 million.The company Continue to acquire BTC From there – even seeing Citibank decide downgrade MicroStrategy’s stock changed from “neutral” to “sell” as it decided to make Bitcoin its main treasury reserve asset.