We don’t see it that way. We actually see the opposite, which the big question forever has been, is this real and, if it’s real, is it going to be banned? The deniers said this wasn’t real, and of course they’re being discredited as the administration, congress, and regulators embrace bitcoin. The sceptics have always said, “Well, it’s real, it’s better than gold, but it’s so good, it’s too good to be true and the government’s going to ban it.” So if the deniers are wrong and if the sceptics are wrong, and it’s pretty obvious they’re both wrong at this point, it’s not going to zero, and if it’s not going to zero, it’s going to a million’.
Since bitcoin began its free fall to $20,000. There has been a lot of fun with Michael Saylor’s Microstrategy getting liquidated. No thanks to the media, which has been spreading a lot of misinformation about a margin call on Microstrategy’s bitcoin-backed loan with Silvergate bank.
We are going to be looking at some of the facts with bitcoin down to only $22,400, even after recovering slightly since yesterday when it fell to a record high of $20,800. Microstrategy’s bitcoin investment is now at a $1,260,000,000 unrealized loss. That’s a lot of money for a company with over 129,000 bitcoins. If Microstrategy’s bitcoin holdings get liquidated all at once, we all know how tragic it is going to be for the already troubled market. Prices could fall below $5,000, but before they go that low, many retail investors as well as corporations that hold bitcoin on their balance sheets will be forced to join the sell-off, which will mean more horrific price declines.
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The whole crypto market is down, with a market cap of $949 billion. We know you have suffered some terrible losses in this horrific crash. Is there any chance that MicroStrategy is going to get liquidated so before the weekends? The answer is no. So far, there is very little evidence to suggest that MicroStrategy is suddenly going to go belly up and take down the whole crypto market.
Let’s begin with the now infamous margin call according to bank rate. A margin call occurs when the value of securities in a brokerage account falls below a certain level known as the maintenance margin, requiring the account holder to deposit additional cash or securities to meet the margin requirements. About two months ago, one of Microstrategy’s subsidiaries took a bitcoin back loan to purchase more bitcoin as part of the agreement between the two firms. Microstrategy will be required to deposit additional cash or securities if bitcoin drops to $21,000. The coin went below that figure briefly on Monday, but there has been no news about such deposits. In addition, during the analytics firms’ earnings call on May 3, the new chief financial officer, Fonda, told investors that Microstrategy would not need to put more funds into the margin requirements. Instead, Microstrategy will be using some of its remaining bitcoin as collateral.
So, essentially, bitcoin needs to be cut in half, or around $21,000, before we have a margin call. That said, before it gets to 50%, we could contribute more bitcoin to the collateral package. So it never gets there but said the first margin call will come at half the price of Microstrategy’s average entry position of $42,000. But the firm only needs to put up more bitcoin as collateral. Even at its current price, Microstrategy’s overall coin holding is almost $3 billion. The company has enough bitcoin to put up its collateral. It can even take a new bitcoin-backed loan if it so wishes.
Saylor also noted that bitcoin would need to fall to around 3,500 before the firm runs out of bitcoin to back its loan.
Here is a tweet from the American entrepreneur and investor, Microstrategy. They have a $205 million term loan and need to maintain a minimum of $410 million in collateral. If the price of bitcoin falls below $3,562, the company could post some other collateral. We still have a long way to go before Microstrategy runs out of bitcoin to back up the loan. Even if bitcoin drops to those levels, Saylor says the company will look for other means to get the collateral. However, the chances that bitcoin will drop to such levels are quite unimaginable and pretty slim. Here is a more recent tweet from Michael Saylor of Bitcoin We Trust. Saylor also has a new laser profile picture on Twitter. He’s sticking with us, and we probably still have a small fighting chance before we really need to get those resumes to McDonald’s.
Let’s take a quick look at the crypto market. As of press time, bitcoin is now trading at $21,356. It has lost over 11% of its price in the last 24 hours and over 23% in the last seven days. Bitcoin prices have not been this low since December 2020, but the coin market dominance is also strengthening compared to what it looked like previously. From around 40%, bitcoin’s dominance is now at around 45%. Ether has also lost almost 30% in a week and around 7 in 24 hours. The NATO token is currently exchanging hands at $1,118.
Interestingly, Cardano is not following the trend. The layer one token has gained over 11% in the past 24 hours with a lower loss of 12% in the past week. It is currently trading at $0.51. The stable coin economy is also holding steady, making up around 17% of the overall crypto market cap. Solana has also gained around 13% and is only $2 shy of Sunday’s price. The native token is currently trading at $29. The Shiba INU avalanche XRP and Dogecoin are also showing signs of recovery from Monday’s crash, but bitcoin and ether remain in the red. The S&P index also continued to trade down, losing around 4% today. The index officially confirmed that the stock market is in a bear market. What do you think about these trends and the Microstrategic liquidation rumours?
[This article is a transcription of a video made by Savvy Finance]
Original video: https://youtu.be/d4bCTH0i_lI]