MicroStrategy could defend $21k BTC to stop a margin call |

In a recent hearing, an investor sued MicroStrategy for stealing his bitcoins during a margin call. The company’s lawyers argued that they were just following the bitcoin blockchain rules and would have to defend $21k worth of BTC as collateral if it was stolen.

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Bitcoin’s price has been fluctuating a lot recently, but the $100k prediction is still intact. MicroStrategy could defend $21k BTC to stop a margin call. Read more in detail here: bitcoin $100k prediction.

If there is a market collapse, MicroStrategy has a strong stake in maintaining Bitcoin over $21,000, according to their Q1 earnings call. According to MicroStrategy’s CEO, Michael Saylor, who is one of Bitcoin’s greatest proponents, the company presently holds 129,200 bitcoins. To buy more Bitcoin, the corporation recently took out a $205 million loan guaranteed by its bitcoin holdings.

Phong Le, MicroStrategy’s CFO, said on the results call that the loan has a 25 percent LTV, implying that they have put up 19,466 Bitcoin as collateral. As a result, if the price of Bitcoin falls to $21,000, there will be a margin call since the LTV would jump to 50%.

However, there is no indication that a liquidation would occur automatically. MicroStrategy would be obliged to contribute to the collateral in its possession. This should be doable since they hold about $4.9 billion in Bitcoin, as long as the Bitcoin is liquid and not allocated as collateral for anything else.

However, according to Cointelegraph, MicroStrategy might buy more Bitcoin at a reduced cost to add to the collateral package. They don’t have to use any of their present Bitcoin holdings to back up their loan. “People who understand #bitcoin purchase it,” Saylor tweeted recently. People who are unfamiliar with #bitcoin speak about it.”

Given Saylor’s bullishness on Bitcoin, it’s difficult to think he’ll beg MicroStrategy to buy additional Bitcoin for $21,000 if they have the liquidity. This is particularly relevant considering Saylor’s prior announcement that their average cost per Bitcoin is $30,200.

microstrategy bitcoinMicroStrategy Q1 Earnings Report (source: MicroStrategy)

MicroStrategy hasn’t said if they’ll keep buying Bitcoin to defend lower resistance levels or relocate their present Bitcoin holdings to cope with a margin call. If money were available, however, it would be a departure from Saylor’s strategic narrative not to do so. They may also be able to use more Bitcoin as collateral to get a larger loan. He looks to be single-minded when it comes to Bitcoin.

“#Bitcoin is a bank in cyberspace, run by incorruptible software, offering a global, affordable, simple, & secure savings account to billions of people that don’t have the option or desire to run their own hedge fund.”

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The “grayscale spell token” is a project that will allow people to trade tokens without having to go through the hassle of withdrawing their money from an exchange. If the project is successful, it could defend $21k BTC to stop a margin call.

Related Tags

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