MicroStrategy stock crashes as Bitcoin just shy of 2020 lows

abdelaziz Fathi

Shares of MicroStrategy are trading under pressure amid strong sell-off in crypto markets and after crypto lender Celsius paused withdrawals and transfers, sparking concerns of contagion into the broader space.

MicroStrategy

MicroStrategy (NASDAQ:MSTR) stock is falling faster than the crypto’s price, just as it outpaced bitcoin’s climb last year. At one point, it fell as much as 30% today and as of writing it continues to deepen the loss even as equity markets make a rebound.

The stock traded down at $145 on Monday, its lowest point in more than 18 months. It lost nearly 80% of its value since it hit a record high above $1000 a year ago. Shares in the business intelligence specialist and cryptocurrency investor have seen a monumental 800% during the period between October 2020 and February 2021 as bitcoin climbed.

Bitcoin its lowest level since December 2020 below the $23,000 threshold on Monday. The question now is if this slide triggers a margin call that would force Saylor’s business intelligence firm to sell part of its holdings.

The company was looking for new ways to generate yield on its massive crypto trove after its subsidiary raised $205 million via an interest-only term loan due 2025. Offered by the crypto-friendly bank Silvergate Capital, the fiat money was granted against a bitcoin holding worth around $820 million, which represents 12% of MicroStrategy’s total crypto holding. With 19,466 BTC held by the subsidiary pledged as collateral, the firm was looking to put its 95,643 “unencumbered” bitcoins to use in exchange for juicy yields.

“Now, as you can see, we mentioned previously we have quite a bit of uncollateralized bitcoin, so we have 95,643 unencumbered bitcoin. So we have more that we could contribute in the case that we have a lot of downward volatility. But again, we’re talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributed,” CEO said a transcript compiled by FactSet Research.

MicroStrategy CEO unfazed by the crypto decline

The analytics software maker, run by bitcoin bull Michael Saylor, has taken advantage of any price drop in Bitcoin to continue beefing up its investment in the world’s most-traded cryptocurrency.

With its most recent purchase, MicroStrategy holds an aggregate of 129,218 bitcoins, which were acquired at an average price of nearly $30,700 per unit.

Bitcoin has shed more than 60% from its record high in November, adding further momentum to the meltdown in cryptocurrencies. However, Microstrategy CEO, who expects the price of bitcoin to hit $6 million, said that the company will never sell its bitcoin holdings. The executive also revealed that he personally owns 17,732 bitcoins, noting that the primary cryptocurrency is “unstoppable” and will replace gold.

MSTR saw a similar crash earlier this year after a SEC filing told MicroStrategy it can’t strip out the volatile swings in bitcoin’s price from its unofficial non-GAAP accounting measures.

MicroStrategy has long urged that US accounting standards should be reconsidered to accommodate companies that hold cryptocurrencies on their balance sheets. Currently, MicroStrategy reports its cryptocurrency holdings as intangible assets, which are then impaired if the value dips. However, the value can never be revised upward if the crypto price increases.

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