Michael Saylor, CEO of business intelligence firm MicroStrategy (MSTR) has dispelled chatter that the firm’s Bitcoin bet is on the verge of facing liquidation. Speaking during an interview after the company purchased more bitcoins this week, Saylor stated that the company was well placed to weather the ongoing storm and continue purchasing more coins.
In March, MSTR took on a three-year $204.7 million loan from crypto-focussed lender SilverGate bank to fund its Bitcoin purchases. The loan was collateralized with around $820 million in Bitcoin which was roughly 12% of MSTR’s holdings. With Bitcoin’s price taking an extended leg down, the firm’s BTC stash value dwindled significantly, triggering rumors that the firm could soon face liquidation under $21,000, statements that Saylor dismissed.
“When bitcoin was cut in half, we are still 10x over collateralized against that,” Saylor told Christopher Jaszczynski, creator of popular youtube crypto channel MMCrypto. “So in essence this is like having a million dollars of collateral and borrowing $40,000 right against it.”
According to Saylor, the company’s financial health would only start to worry shareholders if Bitcoin dropped beyond 95% “If bitcoin goes down by about 95%, then we would have to pledge some additional collateral,” Saylor added. “We also have other cash flows and assets…so we were prepared for the worst case. So if you do the math against our bitcoin position, when bitcoin gets to $3500 or so, we have to come up with some other collateral if it keeps going lower.”
Saylor went on to defend the company’s dollar-cost averaging strategy for acquiring BTC insisting that they were in for the long term. “Our strategy is simple, we acquire bitcoin, we hold bitcoin, we don’t sell bitcoin…we just happen to believe that 100 years from now, bitcoin is like manhattan and you just gonna wanna hold as many blocks of bitcoin as you can.” He went on. According to him, the only two mistakes that they could make were to acquire BTC with so much leverage that they get force-liquidated on a drawdown or stop acquiring BTC.
As for the ongoing crypto meltdown, the crypto billionaire encouraged investors to keep HODLing stating that “if you are going to arrive early to a revolutionary technology and the first digital commodity that’s monetized in the history of the world” then bumpy rides were part of the game.
On Thursday, MicroStrategy purchased 480BTC, bringing its aggregate holdings to 129,699 BTC. At press time, BTC is trading at $19,262, placing that stash at a $2.5 Billion valuation.
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