Market Analysis Report (15 Jun 2022)

Nasdaq-listed business intelligence firm MicroStrategy, which has invested nearly $4 billion to buy 129,218 BTC, has said it did not receive a margin call against a $205 million loan it took in March backed by Bitcoin.

Bitcoin’s price dropped to $20,700 this week at a time in which central banks are starting to take a hawkish stance to battle inflation and crypto firms are laying off staff to survive the bear market. MicroStrategy shares have been dropping along with the price of the flagship cryptocurrency.

The firm borrowed $205 million in a three-year loan from crypto-focused bank Silvergate in March to buy more BTC, and used its existing Bitcoin to secure the loan. MicroStrategy’s chief financial officer said in May that if BTC were to drop below $21,000 it could trigger a margin call. The company 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’s average purchase price for its Bitcoin sits at $30,700. The company has about $2.2 billion in debt and roughly $44 million in annual interest expenses. It’s expected to generate $90 million of free cash flow this year, according to a BTIG analyst.