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Market News MicroStrategy's CEO Claims the Company Can Weather Bitcoin Volatility Amid Worries of a "Margin Call."

MicroStrategy's CEO Claims the Company Can Weather Bitcoin Volatility Amid Worries of a "Margin Call."

Bitcoin neared a price level on Tuesday that could force software firm MicroStrategy Inc to stake more tokens against a bitcoin-backed loan or trigger selling of some of its vast holdings, setting fragile cryptocurrency markets on edge.

Cory Russell

2022-06-15

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MicroStrategy CEO Michael Saylor said on Tuesday the software firm was capable of withstanding volatility in bitcoin prices after the token slumped to levels that triggered fears of possible liquidation on its leveraged position.

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

If the bitcoin price dropped below about $21,000, it would trigger a “margin call” or demand for extra capital, MicroStrategy President Phong Le said in webcast in May.

Bitcoin fell below that level to $20,816.36 on Tuesday before steadying near $22,000. Typically a margin call is met by providing more capital or liquidating the loan’s collateral.

It was unclear if the price moves had any consequences for MicroStrategy, or if the firm already provided more bitcoin or cash to secure the loan. The company did not respond to requests for comment.

MicroStrategy had “anticipated volatility and structured its balance sheet so that it could continue to #HODL through adversity,” Chief Executive Officer Saylor said in a tweet on Tuesday.

A spokesperson for Silvergate declined requests from Reuters for comment.

MicroStrategy shares rose 6% and Silvergate gained 3% on Tuesday, following 25% and 17% tumble on Monday in line with a pullback in crypto assets.

MicroStrategy’s Le said in May that the firm had 95,643 “unencumbered bitcoin” that it could use as extra collateral. Based on bitcoin’s last traded price of $22,254, the value of those coins was $2.1 billion.

“We could contribute more bitcoin to the collateral package, so … we don’t get into a situation of a margin call,” he had said.

Mark Palmer, head of digital asset research at BTIG, downplayed the risk of a margin call forcing MicroStrategy to trim its holdings. “We see no circumstance in which MicroStrategy is going to need to sell any of its bitcoin holdings,” he said.