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Bitcoin Collapse Puts Microstrategy's Potential Margin Call Front and Center

Cryptocurrency Jun 13, 2022 10:10AM ET
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© Reuters. Bitcoin Collapse Puts Microstrategy's (MSTR) Potential Margin Call Front and Center
 
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By Investing.com Staff

Microstrategy (NASDAQ:MSTR) shares are getting rocked again in early trading Monday as bitcoin falls below $24,000, which is getting ever so closer to the margin call price the company used for a loan. Shares were down 25% at last check.

On its first quarter conference call, the company was asked how far does Bitcoin need to fall for Microstrategy to receive a margin call.

CFO Phong Le indicated that it would have to fall to around $21,000 to trigger a margin call, or 50% LTV.

Le also said before it gets to 50%, they could contribute more Bitcoin to the collateral package.

"As far as where Bitcoin needs to fall, we took out the loan at a 25% LTV, the margin call occurs 50% LTV," Le said. "So essentially, Bitcoin needs to cut in half or around $21,000 before we'd have a margin call. That said, before it gets to 50%, we could contribute more Bitcoin to the collateral package, so it never gets there, so we don't ever get into a situation of March call also."

Le said the loan wasn't taken for cash-flow purposes, saying they took out the loan primarily so that they could continue to invest more in Bitcoin and also to create a market for a Bitcoin-backed term loan.

Bitcoin Collapse Puts Microstrategy's Potential Margin Call Front and Center
 

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