Bitcoin Oscillates Near MicroStrategy’s Margin Call Price


A stock chart is seen with a representation of bitcoin in this illustration taken March 13, 2020. REUTERS/Dado Ruvic/File Photo

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SINGAPORE, June 14 (Reuters) – Bitcoin approached a price level on Tuesday that could force software firm MicroStrategy Inc (MSTR.O) to add more tokens against a bitcoin-backed loan or trigger the selling off some of its vast holdings, which is putting cryptocurrency markets on edge.

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

If bitcoin’s price fell below around $21,000, it would trigger a “margin call” or demand for additional capital, MicroStrategy president Phong Le said in a May webcast.

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Bitcoin fell below that level at $20,816.36 on Tuesday before stabilizing near $22,000. Typically, a margin call is satisfied by providing more capital or liquidating the loan collateral.

It was unclear if the price movements had any consequences for MicroStrategy, or if the company had already provided more bitcoins or cash to secure the loan.

The company and Silvergate did not respond to requests for comment.

MicroStrategy’s in May said the company had 95,643 “unencumbered bitcoins” it could use as additional collateral. Based on bitcoin’s last traded price of $22,254, the value of these coins was $2.1 billion.

“We could bring more bitcoins to the collateral package, so…we’re not getting into a margin call situation,” he said.

Mark Palmer, head of digital asset research at BTIG, played down the risk that a margin call would force MicroStrategy to cut its holdings. “We see no circumstances under which MicroStrategy will need to sell any of its bitcoin holdings,” he said.

Nevertheless, the situation, even if it did not result in MicroStrategy selling anything, was enough to maintain the nervous mood.

MicroStrategy shares fell 3% and Silvergate lost 2% on Tuesday, extending losses from their 25% and 17% plunge on Monday in line with a decline in crypto assets.

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Reporting by Tom Westbrook in Singapore and Medha Singh in Bengaluru; Editing by Arun Koyyur

Our standards: The Thomson Reuters Trust Principles.


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