The CEO of Microstrategy, a Nasdaq-listed company that makes software, has dispelled the notion that the company is in danger of being unable to pay a loan backed by bitcoin. He will have to sell some coins. If the price of the cryptocurrency “falls below $3,562 the company could post some other collateral,” the executive explained.

Microstrategy Hasn’t Received a Margin Call

Microstrategy CEO Michael Saylor dispelled the rumor his company may have to liquidate bitcoin in order to pay a margin call for bitcoin-backed loans. The rumor intensified as the price of BTC continued to plummet after the weekend sell-off.

However, Saylor tweeted Tuesday:

When Microstrategy adopted a bitcoin strategy, it anticipated volatility and structured its balance sheet so that it could continue to hodl through adversity.

Microstrategy’s Q1 2022 presentation details that the company took out a three-year term loan of $205 million from Silvergate Bank against 19,466 bitcoins.

Saylor revealed in a May 10 tweet that Microstrategy “needs to maintain $410 million as collateral” for this loan.

Microstrategy is currently holding 115,109 BTC. In addition, its subsidiary, Macrostrategy, is holding 14,109 BTC, bringing its group total to 129,218 bitcoins.

The rumor started circulating when Microstrategy’s president, Phong Le, said in May that if the price of bitcoin dropped below about $21K, it would trigger a “margin call.” Typically, a margin call could be met by the company providing more capital or liquidating the loan’s collateral.

The price of bitcoin dipped below the $21K level this week. Microstrategy said Tuesday to Reuters that it had not been granted a margin call.

We can always contribute additional bitcoins to maintain the required loan-to-value ratio.

Furthermore, Saylor explained that Microstrategy’s 115,109 bitcoins can cover the $410 million collateral down to the BTC price of $3,562. Microstrategy could also use other assets to cover the $10 million collateral. This is in addition to the $3 price for the bitcoins.

Microstrategy has 115,109 BTC that it can pledge. If the price of BTC falls below $3,562 the company could post some other collateral.

What do you think about the Microstrategy margin call rumor? Please let us know your thoughts in the comments below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. This article is not intended to be a solicitation or offer to buy or sell any products or services. Bitcoin.com does not provide investment, tax, legal, or accounting advice. The author and the company are not responsible for any loss or damage resulting from or related to the use or reliance of any content, goods, or services mentioned here.

Read More