MicroStrategy Inc. CEO Michael Saylor warned investors not to be concerned about a possible margin call on a Bitcoin-backed loan, claiming that the business has plenty of collateral to pledge if necessary.
“As long as the Silvergate loan remains collateralized with an LTV less than 50%, there is no margin call,” Saylor wrote in an email to Bloomberg, referring to loan-to-value metrics. “We manage accordingly.”
MicroStrategy’s shares gained more than 3% in Tuesday’s session, following a 25% drop on Monday amid worries of a margin call when Bitcoin fell.
Key Highlights:
- On Tuesday, MicroStrategy CEO Michael Saylor told Bloomberg that the company’s bitcoin-backed loan had no margin call.
- “There is no margin call as long as the Silvergate loan is collateralized with an LTV less than 50%,” Saylor stated in an email.
- As bitcoin’s price fell closer to $21,000, attention was drawn to MicroStrategy’s loan.
Bitcoin’s price has dropped to $21,000 as a result of the latest sell-off. In May, the business stated that Bitcoin would have to fall to about that price before a margin call on a portion of Silvergate Bank’s $205 million loans would be triggered. However, according to the article, MicroStrategy may add more to the collateral package so that it never gets there.
Bitcoin traded at $22,284.76 on Tuesday, reversing a 1% loss. MicroStrategy borrowed money to purchase bitcoin at a higher price. It has about 130,000 bitcoin on its books, buying them for an average of $30,700 over the last two years.
On broader investor concerns about increasing interest rates and slower economic development, bitcoin and other cryptocurrencies have fallen in value, bringing the total market capitalization of the cryptocurrency industry to less than $1 trillion.
MicroStrategy’s stock has dropped by nearly 70% this year. Silvergate Capital is the parent business of Silvergate Bank. Its stock increased over 4% on Tuesday but has lost more than half of its value since 2022.
