Michael Saylor Clarifies Concerns Over MicroStrategy Bitcoin Loan Margin Call 

Updated by Geraint Price
In Brief
  • Michael Saylor says MicroStrategy's strategy allows it to hold bitcoin through volatile times.
  • It comes as the U.S. software company confirmed it did not receive a margin call on its $205 million bitcoin-backed loan.
  • In the event of a margin call, MicroStrategy would provide "some other collateral".
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MicroStrategy CEO Michael Saylor has clarified that the company’s strategy allows it to hold bitcoin (BTC) through volatile times, easing market concerns the firm was facing a margin call on its bitcoin-backed loan.

The comments come as the U.S. software firm confirmed it had, for now, not received a margin call on the $205 million borrowed from crypto-focused bank Silvergate Capital in March. The three-year loan is collaterized by about 20,000 bitcoin.

“When MicroStrategy adopted a bitcoin strategy, it anticipated volatility and structured its balance sheet so that it could continue to HODL through adversity,” Saylor said in a tweet. “Hodl” is a popular term used by crypto investors that refuse to sell regardless of price action.

CFO says no margin call yet

In May, MicroStrategy chief financial officer Phong Le said the company might have to post more collateral or sell some of its bitcoin in the event of a margin call, prompted by a decline in the price of BTC below $21,000.

Bitcoin fell below that threshold on Tuesday, dropping to around $20,800 before recovering to over $22,000. At the time of writing, it is down 3.2% at $21,160 over the past 24 hours, according to CoinGecko.

Dismissing the margin call speculation, Michael Saylor said that would not happen as long as the loan-to-value ratio stays below 50%. He pointed to a previous tweet, which suggested that a margin call could only take place if the BTC price fell below $3,562.

Should that occur, MicroStrategy, which holds 129,218 bitcoin, would provide “some other collateral,” to prevent liquidation, he added. In a separate but not unrelated Reuters report, the company is quoted as saying that it had not received a margin call on the $205 million Silvergate Bank loan. It said:

“We can always contribute additional bitcoins to maintain the required loan-to-value ratio. Even at current prices, we continue to maintain more than sufficient additional unpledged bitcoins to meet our requirements under the loan agreement.”

MicroStrategy CEO criticized

Bitcoin critic Peter Schiff blasted Saylor over MicroStrategy’s bitcoin investments.

“Volatility is one thing. This is a collapse,” said the gold bug, in response to Michael Saylor’s tweet about withstanding “adversity”.

“Did you anticipate something like this? If so, why buy so much bitcoin in the first place? Why encourage others to take on debt to buy bitcoin if you anticipated this type of price collapse? Have you bought more during the collapse,” he quipped rhetorically.

Earlier, Mad Money’s Jim Cramer took potshots at Saylor after bitcoin plunged to new 18-month lows on Monday. Mocking, he said: “As bitcoin plunges, keep in mind that MicroStrategy’s “strategy” is worth watching.”

Shares of MicroStrategy rose more than 3% to $156 early Wednesday morning after crashing heavily the previous day.

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