Will Microstrategy Liquidate its Bitcoin Holdings if BTC Price Drops To $12K?

2022 has been disastrous for the crypto space. Yet again, Bitcoin is witnessing one of the most severe crashes and has marked a record as the fifth asset to witness the worst collapse in the history of finance. Bitcoin, which accounts for 41% of the cryptocurrency market, experienced lows that had not been seen since the pandemic’s low two years ago.

When there’s a crash of this magnitude, it’s safe to anticipate that nearly all crypto holders are suffering losses- especially people who joined the game later on. Not only individuals but even firms have also been hit hard. This includes the biggest Bitcoin-owning company, MicroStrategy Inc. It is said to be sitting on unrealized losses from its acquisitions totaling $1.8 billion.

The software firm with headquarters in Tysons Corner, Virginia, and its affiliates, currently control about 130,000 Bitcoin, valued at about $2.2 billion at the time of writing. Each Bitcoin cost approximately $30,369. The total cost of the Bitcoins purchased was close to $4 billion. The corporation is now $1.8 billion in the hole as a result.

MicroStrategy’s Losses

michael saylor michael saylor Michael Saylor is a Co-founder of Strategy formerly MicroStrategy. Before founding Microstrategy, he was a rocket scientist and studied aeronautics and astronautics at MIT on an Air Force scholarship. He dubs Bitcoin 'Digital Gold'. He made some early investment in Bitcoin as soon as he realized it was going to be the next big thing in shaping decentralized finance from traditional finance. His firm Strategy has made Bitcoin their primary treasure reserve. He is a vocal advocate and Top Bitcoin Speaker who participates in various Bitcoin and Crypto events. Michael Saylor is highly skilled in and has a rich knowledge of numerous fields, including analytics, data warehouses, SaaS, management, cloud computing, enterprise architecture, mobile devices, and many more.   Personal Details: Born: Feb 4, 1965Location: United StatesGraduation: He graduated from MIT in 1987 with a double major in aeronautics, science, technology, and society.    Michael Saylor – Career Timeline 1983–1987: Studied Aeronautics & Astronautics and Science, Technology & Society at Massachusetts Institute of Technology (MIT). 1989: Co-founded MicroStrategy (Strategy). 1998: MicroStrategy IPO – Took MicroStrategy public on the NASDAQ at $12 per share. 2000: Accounting Scandal & Crash – MicroStrategy's stock plunged 62% in a day due to an accounting misstatement, wiping out billions in valuation. 2004–2019: MicroStrategy Rebuilds – Worked towards cloud-based analytics and AI-driven business intelligence, regaining stability. 2020: Bitcoin Strategy & Investment – Led MicroStrategy’s $425M Bitcoin investment. He made it the first publicly traded company to adopt Bitcoin. 2021: Bitcoin Evangelism – Became one of Bitcoin’s most vocal advocates, encouraging corporations and institutions to adopt BTC and blockchain. 2022: Stepped Down as CEO – Transitioned to Executive Chairman to focus entirely on Bitcoin strategy.     msaylor@microstrategy.com EntrepreneurCrypto and Blockchain ExpertAuthor , the executive chairman of the firm, had declared that the business will never sell its Bitcoin. The corporation is sitting on large paper losses as a result of its refusal to sell. Additionally, the business incurred an impairment charge of $917.8 million after reporting losses resulting from the fall in the price of bitcoin earlier this year.

Since bitcoin org bitcoin org - Event OrganiserTechnologyPayment solution is categorized by MicroStrategy as an intangible asset, any decline in its value must be permanently recorded as a loss. If it decides to sell its Bitcoin, it must notify the Internal Revenue Service of any capital gains.

After MicroStrategy reported $1 billion in losses in August 2022, Saylor resigned as CEO to concentrate on the business’s Bitcoin strategy. Since then, the business spent an extra $6 million buying 301 Bitcoins in September 2022. Since then, the average price of Bitcoin has dropped by roughly 15%, meaning that they’re undergoing even larger losses at the moment. 

Michael Saylor, however, insisted that compared to cash or gold, cryptocurrencies were less risky investments and shall reap massive profits later. 

No Margin Call?

Saylor refuted that MicroStrategy had received a margin call on a $205 million loan with Silvergate Capital that was secured by bitcoin in June 2022. A margin call occurs when an investor borrows money to trade that is a multiple of a predetermined amount known as a margin. The investor must contribute more money to maintain the open position when the value of the margin falls below a certain level.

Saylor stated that unless the price of Bitcoin dropped below $3,500, the business had enough Bitcoin to keep the debt collateralized.

Urgent Need For Crypto Regulations

Saylor stated that the current collapse of FTX is both beneficial for Bitcoin and disastrous for the cryptocurrency industry in an interview with CNBC on November 10, 2022. According to him, unlike exchange-traded tokens, Bitcoin is a commodity that can be self-managed.

He insists that the regulators must provide clearer instructions on how to register a digital security, a digital currency, a digital token, and one’s digital exchange.