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  • Writer's pictureanalysiswatch

Title: Bitcoin nears MicroStrategy 'margin call' price

Jun 14, 2022 04:15AM ET

By: AnalysisWatch

Bitcoin approached a price on Tuesday that could force MicroStrategy Inc. to use more tokens for a bitcoin-backed loan or sell some of its large stakes, potentially rocking the fragile cryptocurrency markets.

MictroStrategy, an aggressive bitcoin investor, said it borrowed $205 million from crypto bank Silvergate Capital in March, with the three-year loan secured mostly by about 19,466 bitcoins.

If the price of bitcoin fell below about $21,000, it would trigger a "margin call" or request for additional capital, MicroStrategy Chairman Phong Le said in a webcast in May.

On Tuesday, the bitcoin price fell below that level to $20,816.36 before stabilizing at $23,000. Normally, margin calls are answered by providing additional capital or by liquidating the collateral securing the loan.

It was unclear whether the price move had any implications for MicroStrategy or whether the company had already provided more bitcoin or cash to secure the loan. The company did not immediately respond to an email request for comment outside of business hours.

Silvergate did not immediately respond to an email request for comment, also sent outside of business hours.

MicroStrategy said in May Le that it had 95,643 "unencumbered bitcoins" that could be used as additional collateral.

Still, the situation - even if it didn't result in MicroStrategy selling anything - was enough to keep sentiment in the nervous cryptocurrency markets nervous.

Bitcoin has retreated by about 40% in six weeks. Shares of MicroStrategy fell 25% on Monday and shares of Silvergate fell 17% as fears of rising interest rates weighed on prices of risky assets.

In March, MicroStrategy announced that it planned to use the loan proceeds to buy more bitcoin, among other things.

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