One of the largest corporate bitcoin holders, Michael Saylor’s firm Microstrategy is going underwater while bitcoin is going through a sudden crash
When the price of bitcoin dipped below the price of about $30,700 for its average purchase on Monday, it resulted in a loss for the largest corporate bitcoin holder company, Microstrategy. The price of bitcoin has not had a noteworthy performance for the past few weeks, where the top cryptocurrency has dropped by more than 20% in just a span of slightly more than a month since its latest rally’s end in late March. However, keeping its pace consistently low, the price of bitcoin plunged about 19.47% on Monday while reaching close to $30,000 while extending its ongoing losses.
Chart of the BTC/USD pair showing red candles caused Microstrategy to get immersed as the company trading on the Nasdaq saw a dip in price below $30,700. This is the amount it paid for all its bitcoins on average, accounting for more than 129,000. Bitcoin fell to its recent lowest of $30,331 on Monday.
In early April, Microstrategy purchased bitcoin that was funded by loans backed by bitcoin itself. The company works for software analytics 4,167 bitcoin at the time when it cost around $190.5 million at an average trading price of approx $45,714 per bitcoin. But because the nature of the loans is that the company risks getting the margin called in a situation where the price drops down below $21,000. Michael Saylor’s company can avoid receiving the margin and have to sell several bitcoins from its possession that are backing the loan by depositing for collateral more bitcoin.
Other than Microstrategy, electric car manufacturer giant Elon Musk’s Tesla faces losses. But it is doing so for a longer period of time than Microstrategy as for the time; its average purchase price is higher. Last year, Tesla bought about 43,200 bitcoin for about $1.5 billion. Currently, the average price of bitcoin that the company is holding sits somewhere around $34,700, which leaves the company with an unrealized loss of about 10%. However, it remains unclear how the public companies choose to deal with such a situation where their bitcoin holdings face a loss consistently for a sustained time period.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.