One of biggest holders of Bitcoin is set for liquidation as Bitcoin is not stopping on its way down
Following Bitcoin’s plunge below $25,000, one must remember the words of MicroStrategy’s CFO about the potential to receive a $21,000 margin call on the company’s massive BTC position.
During the earnings call on May 3, the new Chief Financial Officer, Phon Le, was describing the collateralization mechanism on MicroStrategy’s Bitcoin position and told investors that the company will not need to put more funds into their positions.
So essentially Bitcoin needs to be halved or around $21,000 before we have a margin call. That said, before it reaches 50%, we could contribute more Bitcoin to the collateral package, so it will never get there, so we will never enter a March call situation as well.
Additionally, Le told the members of the board that the first margin call would be received after Bitcoin drops below half of their average entry, which was sitting at $42,000. As for now, Bitcoin is already testing the $23,000 price range, which is only $2,000 short of the call.
MicroStrategy doesn’t care
As MicroStrategy gears up for its first margin call, investors aren’t worried that much thanks to the company’s massive liquidity collateral. The company’s available funding is more than enough to fund the existing position and open a new one.
Thanks to Dollar Cost Averaging, their next position might cover the majority of their losses if Bitcoin suddenly retraces. Unfortunately, Saylor’s tendency to purchase Bitcoin at local tops is not good news for investors.
Following surprisingly bad inflation data, risky assets began to rapidly lose value as traders and investors redistributed their holdings into safer options like commodities and bonds.
Due to its risky nature, the cryptocurrency market also became a victim of massive outflows as there is no longer enough demand for risk exposure.
