MicroStrategy Stock Crashes; Bitcoin Struggles Beyond $31K

ByDawn Pipkin

May 10, 2022

MicroStrategy raised money through Bitcoin collateralization and Silvergate Bank to fund more of its $BTC purchases.

  • MicroStrategy (the leading BTC holder) crashed by 60% since the year started.
  • The company held 129,218 $BTC as of 4 April.
  • Michael Saylor’s firm might witness a margin call if BTC declines beneath the $21,000 mark.

MicroStrategy (MSTR), a BTC holding company, recorded a nearly 60% YTD decline, even worse than Bitcoin’s 31% crash.

Remember, it is the largest corporate BTC holder. For now, the company hovers on the red level within the stock marketplace, an outlook directly proportional to BTC’s sharp drop, exploring the $30,000 mark.

The world’s largest crypto remains more than 50% down since hitting the lifetime highs of around $69K in November 2021. While publishing this content, Bitcoin traded at $31,206, dropping 3.09% within the past day.

MicroStrategy Holds 129,218 BTC

The software company has accumulated Bitcoin since August 2022. According to firm filings on 4 April, MicroStrategy holds 129,218 BTCs. It used a BTC-funded loan to purchase the crypto assets.

In March, MicroStrategy approached Silvergate Bank for additional BTC buys, borrowing $205 million. Nevertheless, this was an interest-only loan involving paying the principal after the loan period.

Reports from Bloomberg show other crypto-related stocks presenting steep declines. For instance, a cryptocurrency miner Marathon Digital lost 19%, while its year-to-date dropped 63%. Another Bitcoin holder, Riot Blockchain, saw its balance sheet declining to the lowest zone since November 2020.

Valkyrie’s chief investment officer Steven McClurge revealed the recent month saw the correlation between these asset classes growing as companies associated with digital assets and blockchain continues to increase. He added that this trend would unlikely reverse soon.

Risk Factor

The strategy of taking loans to fund speculative assets has its risks for the company. MicroStrategy might see a margin call if BTC plunges under $21K. That means the firm could sell BTC at a loss by force, translating to magnified losses for its shareholders.

Meanwhile, MicroStrategy’s Phong Le stated that the firm has some uncollateralized BTC, which can be vital amidst a margin call. He added that BTC would unlikely hit $21K, levels last witnessed in December 2020.

Editorial credit: JOCA_PH / shutterstock.com

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