Saylor Pledges More Bitcoin to Back Loan From Silvergate Following Price Drop

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  • Michael Saylor, CEO, and co-founder of MicroStrategy reassures lender Silvergate Bank that the company will post alternative collateral for a $205M loan should BTC dip below $3,562.
  • As bitcoin tracked stocks in the last 24 hours, falling to levels as low as $29K, the co-founder and CEO of business intelligence firm MicroStrategy, Michael Saylor, allayed fears that its bitcoin reserves could prove insufficient to collateralize a $205M loan.
  • MicroStrategy has a $205M term loan and needs to maintain $410M as collateral.
  • MacroStrategy signed a Credit and Security Agreement with Silvergate Bank to borrow $205M in March 2022, using bitcoin held by a third-party and $5M in cash reserves as collateral.
  • As per the agreement, MicroStrategy is required to ensure that a loan to value ratio of 50% is always maintained, excluding the $5M cash reserve held in a Silvergate account.
  • As of March 31, 2022, MicroStrategy had pledged 19466 of the bitcoins held as collateral, representing $914M, with each BTC worth around $46K.
  • At current prices ($31K), the 19,466 bitcoins pledged would still be sufficient at $583M, needing to drop to about $21K to necessitate a margin call, said CFO Phong Le.
  • In this context, a margin call refers to the lenders demand on the borrower to maintain a certain loan-to-value ratio.
  • We have more that we could contribute in the case that we have a lot of downward volatility, he said. Accordingly, Saylor is preparing for a sub $10K scenario, indicating that his company could pledge up to 115,109 bitcoins.
  • These additional coins would ensure that the loan to value ratio would remain at 50% should bitcoin dip as low as $3,562. Beyond that, he said that his company would ensure additional collateral was available. However, he didnt clarify where that collateral could come from.
  • One Twitter user, ZanderQuinn1, responding to Saylor, tweeted, Bitcoin will never see 3k again, an antminer costs like 6-8k, arguing that bitcoin would never drop as low as Saylor was suggesting since an Antminer computer used to create new bitcoins itself costs between $6K to $8K.
  • MicroStrategys bitcoin holdings saw their value plummet to below their average purchase price when the price for a single bitcoin dropped under $30700 yesterday. Furthermore, shares of MicroStrategy were down 58% this year, reflecting a souring sentiment toward tech stocks, reports Barrons.
  • According to a Bloomberg report, Saylor remains undeterred and intends to buy more bitcoin
bic microstrategy btc bitcoin.jpg.optimal Saylor Pledges More Bitcoin to Back Loan From Silvergate Following Price Drop
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