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MicroStrategy pushes away Margin Call rumours

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MicroStrategy’s bank account now holds 129,218 Bitcoins. In fact, some believe the firm may be obliged to liquidate or pledge a significant portion of its Bitcoin reserves as collateral as a result of Bitcoin’s price fall.

Microstrategy’s CEO Michael Saylor claimed on Tuesday that the company does not expect to get a margin call. He added that they have sufficient collateral if they are required to post additional collateral. The next day, however, reports surfaced that his company would have to sell its Bitcoin to make a margin call on a $205 million Bitcoin-backed loan from Silvergate Capital.

MicroStrategy says it is all rumoursĀ 

During a webcast in May, MicroStrategy President Phong Le had predicted that if the price of Bitcoin fell below $21,000, it would prompt a “margin call” or a demand for additional capital.

On Tuesday, Bitcoin dipped below that mark, hitting $20,816.36 before stabilizing near $22,000. The company soon claimed it had not received a margin call in an email.

Michael Saylor, however, dispelled rumours that his firm is on the verge of needing to liquidate its Bitcoin to fulfill a margin call on a Bitcoin-backed loan. As the price of BTC continued to fall after the weekend sell-off, the rumour grew louder. Saylor tweeted Tuesday,

“When Microstrategy adopted a Bitcoin strategy, it anticipated volatility and structured its balance sheet so that it could continue to hodl through adversity.”

Furthermore, according to Saylor, Microstrategy’s 115,109 Bitcoins can pay the $410 million collateral down to the BTC price of $3,562. According to the CEO, if the price of Bitcoin drops even further, Microstrategy has other assets it can use as collateral.

The firm “has to keep $410 million as collateral” for the Silvergate Capital loan, according to a tweet from Saylor on May. Microstrategy presently has 115,109 BTCs in its possession. In addition, its subsidiary holds 14,109 Bitcoins, increasing the total number of Bitcoins held by the company to 129,218.

Will continue to HODL?

MicroStrategy argued that when it created a “Bitcoin Strategy,” it anticipated volatility and constructed its balance sheet to allow it to “hodl” through periods of uncertainty.

The software company will not be forced to liquidate any of its Bitcoin holdings, according to Mark Palmer, BTIG’s Head of Digital Asset Analysis.

The collapse of the cryptocurrency market, which began in April, continued over the weekend. The market lost 14% of its value over a 24 hour-period. Since yesterday, Bitcoin and Ether, for instance, have lost 1.31% and 1% of their values, respectively.

MicroStrategy is the world’s largest independent business intelligence software company, with a stock on the New York Stock Exchange (NASDAQ). In August of 2020, it began investing in cryptocurrencies as treasury reserve assets, citing a weakening U.S currency and global macroeconomic concerns.

“We feel like we have a fortress balance sheet,” Saylor said. “We’re at ease, and the margin strain has been successfully managed.”

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Jibin Mathew George is Editor-in-Chief at AMBCrypto. A domain expert in International Relations (European Politics), he has always been a believer in the unlimited possibilities afforded by blockchain and by extension, cryptocurrencies. As someone who has been watching and writing about this space for over 5 years now, Jibin has closely tracked the emergence of cryptos and digital assets as a separate asset class in portfolios world over. A lawyer by training, he previously contributed to the News and Research desk of Diplomacy & Beyond Plus. Before his stint at D&B, he was Editor at ED Times. Jibin also takes a great interest in politics, especially the corresponding effect political decisions and fiscal policy have on the world of finance, with a special focus on cryptocurrencies.
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