Microstrategy’s much-celebrated Bitcoin war chest is severely hampering the publicly traded company. Though, how dire is it really?
- Microstrategy’s Strategy To Combat Market Turbulence
- Long-Term Viability Of Microstrategy
Microstrategy’s Strategy To Combat Market Turbulence
In some ways, you could argue the 2020/2021 bull run was kickstarted by Michael Saylor. Saylor, the then little-known CEO of a little-known tech company, started buying up Bitcoin in August of 2020. Even though the business-facing software company wasn’t as big of a get as Tesla, it was still a big deal that a publicly-traded company was willing to make a big bet on Bitcoin.
For a good year, that bet was looking great. Not only was the company’s Bitcoin up a lot, their stock was through the roof. After languishing in the $124 range by August 2020, the company’s stock got over $1000 by February of 2021. Today the stock closed at $152. It’s still higher than where it was. But it’s getting periosly close.
This is thanks to — if you have been living under a rock — the massive drop in Bitcoin’s price. It’s currently uncomfortably hovering above 22k. But what’s the big deal? Microstrategy is like its CEO and founder, a HODLer. Saylor says he will never sell the company’s Bitcoin — instead use it as an asset for loans. And, when it comes to HODLing, you only lose if you sell. That’s what all the Bitcoiners are doing right now. Just riding it out.
The problem with that is, Microstrategy isn’t your average HODLer.
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Long-Term Viability Of Microstrategy
Microstrategy owns about 3 billion USD worth of Bitcoin. It’s invested about 4 billion. To spell it out to you, that’s about 1 billion in losses. But again, what’s the problem? The problem is Saylor didn’t just DCA like the good Bitcoin boy he is. He acquired that amount via a mix of cash, junk bonds, and convertible notes. In other words, not all of it was bought with his company’s money. At some point, you have to pay the piper.
Saylor has dismissed the notion of a margin call, going as far as saying that Bitcoin would have to fall to a science fiction-y sounding $3,500 for that to happen.
Others have speculated that the margin call number is far higher. So high that Microstrategy is currently perilously close to getting clapped.
You should not knowingly post false statements:
– Moving wallets does not = selling
– @saylor has moved wallets before
– we’re nowhere close to liquidation
– @saylor was clear margin call would happen ~$3500… that’s not close at all
– he can also post other company collateral
— saiyar (@saiyar) June 13, 2022
However, their theory isn’t really matching up with the facts. So far, the Microstrategy’s wallet hasn’t been doxxed. As a result, this theory doesn’t stand to reason.
Not to mention, the $3500 number Saylor gave was from an investor presentation. As much as we like to think publicly-traded companies operate in a totally lawless way, that’s not really the case. You have to be very careful with the way information you provide investors.
Beyond just trusting they aren’t pulling a fast one, Microstrategy has almost unparalleled access to credit compared to most of crypto. Not only do they have a lot of of an asset that many now value long-term, they also have a profitable business. Those two elements make it easy for the company to access the credit they need to deal with whatever crisis comes crypto’s way.
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