MicroStrategy Gives Lowest Possible Bitcoin Price to Require Maintenance Warranty

With the price of Bitcoin falling, rumors swirled as to whether MicroStrategy was in danger of being liquidated on its $205 million Silvergate loan. On Tuesday, the company’s CEO, Michael Saylor, clarified the amount of collateral required by this loan and the flexibility they have.

MicroStrategy Bitcoin Loan

Like Saylor clarified on Twitter, the loan requires a maintenance collateral worth $410 million to remain active, which is double the value of the loan itself.

MicroStrategy took out its Silvergate loan at the end of March and used the funds to increase its Bitcoin position from 4,167, up to 129,218 BTC in total. Interestingly, the loan is secured by Bitcoin, which means it is backed by the company’s existing crypto holdings.

As the price of Bitcoin declines, it is common for traders who take out loans of this nature to be “liquidated”. Liquidation means that his collateral is no longer sufficient to cover his position, forcing him to sell his holdings. For example, when Bitcoin crashed to $31,000 yesterday, market traders lost over $300 million in liquidations.

Yet, according to Saylor, there is still a long way to go before MicroStrategy meets a similar fate. The company’s 19,466 bitcoins will remain sufficient security until its price drops to $21,062.

However, should he reach that level, the CEO says he will simply commit more of his remaining 115,109 Bitcoins to the loan. If fully pledged, the loan can remain intact down to as low as $3,562 – in which case MicroStrategy can still pledge other forms of collateral.

According to the MicroStrategy site, the term of the loan is 3 years and requires them to pay a minimum interest rate of 3.75%. At its inception, MicroStrategy prepared a $5 million cash reserve in advance to handle interest and issuance payments. It also does not prevent the company from incurring additional debt.

MicroStrategy’s Bitcoin goes underwater

Due to the bear market, MicroStrategy’s total bitcoin position has technically gone underwater for the first time in months. Although its average Bitcoin purchase price is currently $30,700, the price dipped below $30,000 on Monday for the first time since July 2021.

That didn’t shake Saylor’s confidence in the asset. While he fell yesterday, the CEO casually joked to have to go back to McDonald’s for work.


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