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MicroStrategy shares fall on Bitcoin sell-off

MicroStrategy has promised never to sell any of the approximately 130,000 bitcoins it holds. However, there is talk of margin call risk.

The company is at risk of margin calls

Following the current sell-off in Bitcoin, the largest institutional holder of the cryptocurrency is under pressure from a large unrealized loss. This has already climbed to $1 billion.

After the cryptocurrency’s weekend plunge, the question is whether the technology services firm will be forced to sell by margin calls.

Read also: Crypto adoption continues despite strong bear market

Indeed, much of the company’s purchases have been through junk bond and convertible note sales. However, the company’s CEO, Michael Saylor, weighed in on the subject of margin calls last month and dismissed talk of a margin call. According to him, the company would only have a problem if bitcoin reached a value of $3,562.

MicroStrategy shares are down 22% today.

Bitcoin coin with MicroStrategy logo in background

Michael Saylor is a Bitcoin maximalist

We can see how much Saylor believes in Bitcoin on his Twitter.

Saylor has been accumulating bitcoin for the past few years in every way possible. He makes purchases both from the profits of his analytics software business, through the issuance of convertible bonds, and by borrowing against his bitcoin reserves. According to sources, Saylor has purchased bitcoins for a total of approximately $4 billion, and $2.4 billion of that was through borrowing.

Regarding the hedging of its bitcoins, the company commented as follows.

“Now, as you can see, we have quite a few unencumbered bitcoins, so we have 95,643 unsecured bitcoins. So we have more to contribute in case there is a lot of volatility to the downside. But again, we’re talking about $21,000 before we get to the point where we need to contribute more margin or more collateral,”

Bruno is an Investment enthusiast with several years of experience in the industry. He enjoys following the latest news and technology trends...

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