MicroStrategy stocks plunge alongside Bitcoin but its CEO plans to hodl Bitcoin ‘through adversity’
The recent crypto market crash has sent the stocks of crypto-focused companies plummeting.
Business intelligence firm holding the largest corporate Bitcoin treasury, MicroStrategy, saw its stock plummet by 28% in premarket trading today. This is the biggest drop in the company’s stock in five years.
According to the monitoring resource Bitcoin Treasuries, MicroStrategy currently holds its 129,218 BTC stack at a net loss of US$1.06 billion.
The business intelligence firm took out a US $ 205 million loan from crypto-focused bank Silvergate Capital in order to fund its Bitcoin purchases. This morning, the price of Bitcoin dropped below US$ 21,000, threatening to trigger a margin call and a potential liquidation of the Microstrategy’s BTC holdings.
Michael Saylor, American business executive and CEO of MicroStrategy, has revealed that his firm had anticipated the volatility and prepared a Bitcoin hodling strategy so the firm would have backup collateral against liquidation when Bitcoin’s price drops further.
‘When MicroStrategy adopted a Bitcoin Strategy, it anticipated volatility and structured its balance sheet so that it could continue to HODL through adversity,’ he wrote on Twitter.
‘That's all FUD,’ he told mainstream media in a subsequent interview about the issue.
‘We started with $5 billion of unpledged collateral, we borrowed $200 million against it, so that's a loan-to-value ratio of 4%. If Bitcoin fell 95% from that number then we'd have to post additional collateral.’
He also called the margin call question a ‘nothing issue.’
MicroStrategy is one of the biggest advocates for cryptocurrencies, and became the first publicly traded company to purchase Bitcoin as part of its capital allocation strategy. In August 2020, the firm acquired 21,454 Bitcoin.