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MicroStrategy dispels fears of a "margin call," claiming that it can survive volatility

Image: Reuters Berita 24 English -  MicroStrategy Inc , a software company based in the United States, said it has not received a margin cal...

Image: Reuters

Berita 24 English - MicroStrategy Inc, a software company based in the United States, said it has not received a margin call on a bitcoin-backed loan and can survive more volatility, assuaging market fears that the token's decline will lead to asset liquidation.

In March, MicroStrategy, an aggressive investor in the highly volatile cryptocurrency bitcoin, borrowed $205 million from cryptocurrency bank Silvergate Capital Corp, with the three-year loan backed mostly by 19,466 bitcoins.

In a webcast in May, MicroStrategy President Phong Le predicted that if the price of bitcoin fell below $21,000, it would prompt a "margin call," or a demand for additional capital.

On Tuesday, Bitcoin dipped below that mark, reaching $20,816.36, before stabilising near $22,000. The business stated it had not received a margin call in an email.

Silvergate did not respond to a request for comment.

Following strong selling on Monday, MicroStrategy shares rose 6% and Silvergate increased 3% in U.S. trade on Tuesday.

A margin call is often met by providing additional capital or liquidating the loan's collateral.

MicroStrategy stated in a statement emailed late Tuesday in the United States, "We can always contribute additional bitcoins to maintain the acceptable loan-to-value ratio."

"Even at current prices, we still have more than enough more unpledged bitcoins to match our loan agreement's conditions."

MicroStrategy had also "anticipated volatility and structured its balance sheet so that it could continue to #HODL through adversity," according to Chief Executive Officer Michael Saylor, who used a deliberate garble of the word "hold" in a tweet on Tuesday.

The remarks brought scant solace to cryptocurrency markets, which have been roiled by the possibility of rising US interest rates making riskier assets less appealing, but experts downplayed concerns that price movements would lead to liquidation.

"We don't see any reason for MicroStrategy to sell any of its bitcoin assets," said Mark Palmer, BTIG's head of digital asset research.

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