MicroStrategy dispels ‘margin call’ fears, says it can withstand volatility

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

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June 15 (Reuters) – U.S. software developer MicroStrategy Inc (MSTR.O) said it had not received a margin call against a bitcoin-backed loan and could withstand increased volatility , easing market jitters after the token’s fall raised fears of an asset sell-off.

MicroStrategy, an aggressive investor in the highly volatile cryptocurrency bitcoin, borrowed $205 million from crypto bank Silvergate Capital Corp (SI.N) in March, with the three-year loan mostly secured against some 19,466 bitcoins.

If the Bitcoin price fell below around $21,000, it would trigger a “margin call” or demand for additional capital, MicroStrategy President Phong Le said in a May webcast.

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Bitcoin fell below that level at $20,816.36 on Tuesday before stabilizing near $22,000. The company said by email that it had not received a margin call. Read more

Silvergate declined to comment.

MicroStrategy shares rose 6% and Silvergate gained 3% in U.S. trading on Tuesday after strong selling on Monday.

Typically, a margin call would be satisfied by providing more capital or liquidating the loan collateral.

“We can always contribute additional bitcoin to maintain the required loan-to-value ratio,” MicroStrategy said in an emailed statement Tuesday evening in the United States.

“Even at current prices, we continue to hold more than enough uncommitted additional bitcoin to meet our requirements under the loan agreement.”

MicroStrategy had also “anticipated volatility and structured its balance sheet so it could continue to #HODL through adversity,” chief executive Michael Saylor said in a tweet on Tuesday, deliberately using the popular mantra “hold.” . among crypto enthusiasts.

The comments brought little relief to cryptocurrency markets shaken by the prospect of higher U.S. interest rates making risky assets less attractive, but analysts played down fears that the price moves could trigger a shock. liquidation.

“We see no circumstances under which MicroStrategy will need to sell any of its bitcoin holdings,” said Mark Palmer, head of digital asset research at BTIG.

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Reporting by Tom Westbrook in Singapore and Medha Singh in Bengaluru; Editing by Maju Samuel and Christopher Cushing

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