CEO Says MicroStrategy Can Withstand Bitcoin Volatility Amid ‘Margin Call’ Fears

A stock chart with a representation of bitcoin is shown in this illustration taken on March 13, 2020. REUTERS/Dado Ruvic/File Photo

June 14 (Reuters) – MicroStrategy (MSTR.O) CEO Michael Saylor said Tuesday that the software company is able to withstand fluctuations in the price of bitcoin after the token fell to levels that raised fears of a possible liquidation on its leveraged position.

MictroStrategy, a strong investor in bitcoin, said it has borrowed $205 million from crypto bank Silvergate Capital. (SI.N) In March, with a three-year loan mostly secured against about 19,466 bitcoins.

MicroStrategy’s head, Fong Lo, said in an online broadcast in May that if the bitcoin price fell below around $21,000, it would trigger a “margin call” or additional capital demand.

Bitcoin fell below that level to $2,0816.36 on Tuesday before settling near $22,000. Usually a margin call is met by providing more capital or liquidating the loan guarantee.

It was not clear if the price movements had any consequences for MicroStrategy, or whether the company had actually provided more bitcoin or cash to secure the loan. The company did not respond to requests for comment.

MicroStrategy’s CEO said in a tweet on Tuesday that MicroStrategy “anticipated volatility and structured its balance sheet so it can continue to #HODL through adversity.”

A spokesman for Silvergate declined requests from Reuters for comment.

MicroStrategy shares are up 6% and Silvergate shares are up 3% on Tuesday, after falling 25% and 17% on Monday in line with the decline in crypto assets.

MicroStrategy said in May that the company had 95,643 “unlinked bitcoins” that could be used as collateral. Based on the last Bitcoin traded price of $22,254, these coins have a value of $2.1 billion.

“We can contribute more bitcoin to the escrow package, so … we don’t get into a margin call situation,” he said.

Mark Palmer, head of digital asset research at BTIG, has played down the risks of a margin call that forces MicroStrategy to reduce its holdings. “We don’t see any circumstance in which MicroStrategy will need to sell any of its bitcoin holdings,” he said.

Additional reporting by Tom Westbrook in Singapore and Medha Singh in Bengaluru; Editing by Arun Koyyur and Maju Samuel

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