“When @MicroStrategy adopted a #Bitcoin Strategy, it anticipated volatility and structured its balance sheet so that it could continue to #HODL through adversity,” Saylor posted on Twitter on June 14.
HODL, a popular term among crypto enthusiasts, stands for hold on for dear life. It’s similar to the investment strategy of buy and hold.
Saylor’s tweet is accompanied by a link to another tweet posted in May in which the billionaire was already trying to reassure the markets by explaining that MicroStrategy had enough collateral to pledge to meet a Bitcoin loan requirements from Silvergate Bank.
MicroStrategy implemented its Bitcoin strategy in the third quarter of 2020, becoming the first established company to add digital currency to its balance sheet. One of the consequences of this decision is that the group’s stock performance substantially reflects the direction of Bitcoin’s price, up or down.
The company’s first-quarter results reflected an impairment charge of $170.1 million due to Bitcoin. MicroStrategy had to reduce the value of its Bitcoin holdings to better reflect changing prices. Overall, the company has booked a total impairment charge of $1.1 billion related to its Bitcoin holdings.
No Margin Call on The Bitcoin Loan Bitcoin critics have taken advantage of the crash to question the impact it is having on MicroStrategy, which, in March, operstoen $205 million as an interest-only loan for a term of three years, which is collateralized by bitcoin, from Silvergate Bank, a subsidiary of Silvergate Capital Corporation (SI ) - Kritt Silvergate Capital Corporation Class A Rapport .
"MicroStrategy huet e $ 205M Begrëff Prêt a muss $ 410M als Garantie erhalen," Saylor schreift op Twitter op Mee 10. "$ MSTR huet 115,109 BTC datt et verpflichte kann. Wann de Präis vum #BTC ënner 3,562 $ fällt, kann d'Firma e puer aner Niewefuerderungen posten ", huet de Milliardär bäigefüügt mat engem Link op Rutschen vun der Presentatioun vum éischte Véierel Akommes.
During a May conference call, the company said that the price of Bitcoin would have to fall to around $21,000 before a margin call could be made on this $205 million loan. But MicroStrategy also said it could provide more collateral to prevent the call from being triggered.
Bitcoin is currently trading at $21,006.83 and has even fallen to around $20,000, according to data firm CoinGecko .
But in an email to Bloomberg, Saylor said there will be no margin call on the Bitcoin loan.
“As long as the Silvergate loan remains collateralized with an LTV less than 50%, there is no margin call,” the billionaire wrote, referring to loan-to-value metrics. “We manage accordingly.”
MicroStrategy shares have lost more than 71% since January.