MicroStartegy as it has been publicly informed that it is a technology company that has been a staunch supporter of Bitcoin for the past two years. MicroStrategy frequently increases its holdings of Bitcoin when there is a price drop in BTC. Yet with this new mass collapse, has it affected MicroStrategy?
Bitcoin recently traded at around $ 28,000, recovering a bit of it from an initial loss that brought BTC down to $ 27,000. The fall is seen as too fast, with BTC just hitting a recent high of around $ 40,000. The all -time high, at around $ 69,000, was reached in November.
On average MicroStrategy has bought bitcoin for $ 30,700 based on its first quarter earnings report. On the same date (March 31), the company owned about 129,218 bitcoins, spending a total of $ 3.967 billion to acquire them.
The price fall starting in January has had an impact on MicroStrategy shares. Not to mention the massive fallout this week.
MicroStrategy shares fell more than 13% on Thursday to a trading price of $ 145 after plunging 25.4% on Wednesday. Based on Wednesday’s close, MicroStrategy shares are down about 87% from their bitcoin era high of $ 1,315 on February 9, 2021.
MicroStrategy, which generates $ 510.8 million in revenue in 2021, has made increasingly risky bets in bitcoin. Initially the company made purchases with cash in hand, spending about $ 250 million, including charges and expenses, at the time bitcoin was trading under $ 12,000 per token.
MicroStrategy then began leveraging the debt market to fund additional purchases, issuing $ 650 million of debt notes in December 2020 and $ 500 million of bonds in June 2021. Proceeds from both were used to buy more bitcoin.
Most recently, on March 29, MicroStrategy subsidiary closed a $ 205 million bitcoin -secured loan with the goal of acquiring more bitcoin. Then on April 5, Michael Saylor announced MicroStrategy bought 4,167 bitcoins at an average price of $ 45,714 each.
With a sharp fall, MicroStartegy could face a dangerous situation that is when bitcoin falls below $ 21,000 per token. MicroStrategy will be required to make margin calls. The company will either have to sell its Bitcoin at a lower price or have to attract more collateral for the loan. The software firm recently posted huge losses in the first quarter of 2022 following the fall in the value of Bitcoin.
