Michael Saylor margin call if Bitcoin dumps below $21,000

[hatshepsut93]

What makes such scenario realistic is the ability of Bitcoin to flash crash into very low levels for no big reason. One of such moments was a 50% crash when quarantine was announced, there was no fundamental reasons for Bitcoin to crash so hard, yet panic and cascading liquidations did their job.

Even retail investors can take a lesson from it - never trade with leverage on a volatile market.

[franky1]

What makes such scenario realistic is the ability of Bitcoin to flash crash into very low levels for no big reason. One of such moments was a 50% crash when quarantine was announced, there was no fundamental reasons for Bitcoin to crash so hard, yet panic and cascading liquidations did their job.

Even retail investors can take a lesson from it - never trade with leverage on a volatile market.

that was not a flash crash
that was the ignorance of people not realising that the pump to the ATH was the strange scenario.. of no fundamental reason for the high
the correction after that was the normal expectation after any pump

the 2020-2021 scenario was never meant to be a situation where the price remained at ~$65k
yep i said it so let me make it clear,..
the pump upto $65k was the 'no fundamental reason to hype so high'

..
personally i am bitcoin rich, fiat poor(well not poor, but you get my expression). but even i am in the process this week of gathering as much fiat as i can to buy bitcoin while its cheap (i dont need to as i am bitcoin rich already)
but i know bitcoin is not going to 'bottom out' at extremely lower than this weeks average. we are already at the cheap bottom. there is not much more it can go down by. so im happy to throw more fiat at bitcoin at these deliciously cheap prices

[coolcoinz]

What makes such scenario realistic is the ability of Bitcoin to flash crash into very low levels for no big reason. One of such moments was a 50% crash when quarantine was announced, there was no fundamental reasons for Bitcoin to crash so hard, yet panic and cascading liquidations did their job.

Even retail investors can take a lesson from it - never trade with leverage on a volatile market.

that was not a flash crash
that was the ignorance of people not realising that the pump to the ATH was the strange scenario.. of no fundamental reason for the high
the correction after that was the normal expectation after any pump

That crash hatshepsut93 was talking about was 10k-4k That wasn't a crash after a pump or an ATH. The price was stable in the 7-9k range for a long time at that point. It was a so called black swan event, a strange scenario. There was no fundemental reason to go that low. It went that low because all trading is done on a fraction of Bitcoins that are in circulation and the price is dictated by a few big exchanges. You manage to crash binance or coinbase and you get a worldwide ripple effect.

[Ale88]

MicroStrategy holds crap ton of spot bitcoin on their balance sheets; they could just add more and more collateral so they wouldn't get liquidated. Unless we nuke far far below the $21k threshold, the risks for liquidation are virtually nonexistent.

If the solution was so simply why would Saylor make that kind of declaration? Let's not forget that his average buying price is around $29-30k. He's also running a company and he's already taking a huge risk with bitcoin.

[stepwilli]

I am not sure if taking a loan would be safe unless you can pay it without the price action taking place. If you take out a loan, and just ignore the bitcoin you buy with it and pay the loan with your salary then it could be fine, there is no problem with that, people grow richer via loans and that has been established for a long time.

But at the same time, we are talking about some people who take it with the hopes that bitcoin would go up before they need to pay it back. If you are taking a loan and hope that the price would go up so you would be easily paying, then it would not be easy because price could go down a lot and it would hurt you.

[The Sceptical Chymist]

Exactly! It is very risky especially here in cryptocurrency.

Fuckin' astute observation, eagle eyes.

MicroStrategy holds crap ton of spot bitcoin on their balance sheets; they could just add more and more collateral so they wouldn't get liquidated. Unless we nuke far far below the $21k threshold, the risks for liquidation are virtually nonexistent.

If the solution was so simply why would Saylor make that kind of declaration? Let's not forget that his average buying price is around $29-30k. He's also running a company and he's already taking a huge risk with bitcoin.

The solution of "adding as much collateral as needed so as to prevent loan default" is perfect!  I guess it really just depends on a tiny detail: whether MSTR has enough collateral to keep piling on. 

And that part of mk4's post I bolded doesn't exactly look impossible when the price of bitcoin is sitting at $28,880, which it is as I write this.

Surely he finds more collateral, it's not like he is all in on some leveraged trade. Also he has very powerful friends who understand crypto to lend him collateral if it comes to that.

That line of thinking sounds so much like "those banks are just too big to fail" or "someone powerful will step in and prevent the stock market from crashing [think October 1929]".  It sounds so logical when it's in your head, but in the real world there's no crash that's too important to stop or anything too big to fail.  Sometimes people or institutions with very deep pockets step in to save the day, but it's rare, and I seriously doubt anyone would help Michael Saylor stay solvent unless it was at a high interest rate...in other words, I'm thinking if push came to shove he'd sell some bitcoin rather than go into further debt or default on his loan(s).

[Leviathan.007]

I don't believe if this happens to them, firstly Michael Saylor is a long term investment, and as a long term player in the markets, he knew about the possibles risks of this market so he did consider the situation when the price falls down, even as someone who saw 3 market falls in the history of bitcoin I'm not really shocked to see this situation so I expect to see Michael Saylor having no plan for these days when the price is falling down, also even the price 21K cannot be a real red alarm for them because an official company they can add some collateral and even if they need more they will add more collaterals, I think he is even thinking about adding more bitcoins at current prices when the market bloody and everyone is selling.

[franky1]

any way, for shits and giggles  (because i dont need to buy more coin, but chose to anyway)..
i just threw in $6k of fiat into bitcoin.
lets call it a bit of spare play money im not concerned with.

why.. well bitcoin is cheap this week, i see no risk at this discount level. ill keep it separate from my main hoard. but ill cash it out when it profits. .. because.. it will
because i am not worried about bitcoin dropping to $21k/btc. so much so i just put my money on it.

[bbc.reporter]

MicroStrategy holds crap ton of spot bitcoin on their balance sheets; they could just add more and more collateral so they wouldn't get liquidated. Unless we nuke far far below the $21k threshold, the risks for liquidation are virtually nonexistent.

We cannot be very certain if this is as uncomplicated as adding more money to a losing investment because this might also be the fastest way of losing everything assuming that this bear market might occur for a longer amount of time than what is expected or if it would pump to laser eyez to $100k on the next bear market. It is very head shaking that many people in the community find this type of risk taking okay as an investment thesis.

[Ale88]

Personally I'm more worried about the whole crypto situation rather than wondering whether Michael Saylor is going to be liquidated or not. Things are getting worse and worse, and considering the whole social-economical situation in the world this year probably won't get any better. We never went below the previous ATH, which is just above $20k, just like Saylor's margin call, quite a coincidence...

[blockman]

Well, a surprising $25k has touched bitcoin. Would they be worried if it actually breaks and stops on $21k? I guess they have it on their book and plans and what they have to act upon on this.

Personally I'm more worried about the whole crypto situation rather than wondering whether Michael Saylor is going to be liquidated or not. Things are getting worse and worse, and considering the whole social-economical situation in the world this year probably won't get any better. We never went below the previous ATH, which is just above $20k, just like Saylor's margin call, quite a coincidence...

Big shots are taking the spotlight whenever the market's on high or low. That's why it's a big thing to discuss if it's all about these whales that we know. But just as you, I'm worried as well and I guess we have to bear this for a long time or maybe until this year ends.

[Fundamentals Of]

The initial alarms must have already been triggered for MicroStrategy by this recent dip. Although I don't think there is a very urgent call following this. MicroStrategy has an ample amount of backup to make sure they avoid a margin call. $21,000 may not be that far but if they will be able to make use of their uncollateralized Bitcoin to defend any possible attempt of the prize to reach $21,000, it could very well absorb further dips below $20,000 which is not highly probable.

[bittraffic]

Many traders were probably getting this margin call for mistakenly seeing price will continue to bounce since last week.
Its good that Saylor has lots of BTC in their balance to send  to avoid a big loss. Its not yet there at $21k though. I wouldn't wait to drop another thousands, if I were Saylor I'd be adding more to be sure. We know the volatility of BTC when time comes that people are saving their cash.

[NotATether]

The real whales of the cryptospace, Sam Bankman Fried, Changpeng Zhao and Arthur Hayes and the cryptofunds who follow them can manipulate the market to liquidate Michael Saylor.

And why would these respectable folks try to do something as obscenely descpicable as that?

I'm sure all of these folks have their own companies or trusts (CZ is obviously Binance CEO), so MicroStrategy can just sue them all for damages if they become dumb enough to act together.

[Flexystar]

MicroStrategy holds crap ton of spot bitcoin on their balance sheets; they could just add more and more collateral so they wouldn't get liquidated. Unless we nuke far far below the $21k threshold, the risks for liquidation are virtually nonexistent.

Just imagine in the process they have so much bitcoins on the balance sheet that it would take only one point in future when bitcoin is reaching ATH and boom their investment for so many years will pass the vibe of holding profitability. That would be crazy Cool to see and let’s not forget this is also creating resistance for ourselves. The more they hold on to their bitcoins the more bitcoin is slower in dropping in terms of USD.

[LegendaryK]

I am quite certain their position on taking a loan against their bitcoin to buy more bitcoin is safe because they have more bitcoin to deposit in their account to avoid a margin call. However, taking leverage by borrowing against a volatile asset to buy the same volatile asset is very risky. The real whales of the cryptospace, Sam Bankman Fried, Changpeng Zhao and Arthur Hayes and the cryptofunds who follow them can manipulate the market to liquidate Michael Saylor.



MicroStrategy’s CFO Phong Le explained in the company’s first-quarter earnings call on Tuesday that if Bitcoin’s price falls below $21,000, or around 50% from current levels, it will be forced to pony up more cryptocurrency to back its $205 million Bitcoin-collateralized loan with Silvergate Bank that was used to buy Bitcoin in the first place.

"We took out the loan at a 25% LTV; the margin call occurs at 50% LTV,” Le said. “So essentially, Bitcoin needs to cut in half, or around $21,000, before we’d have a margin call.”

The CFO noted that MicroStrategy still holds “quite a bit” of uncollateralized Bitcoin that it could use to answer any potential margin call, however.

“As you can see, we mentioned previously we have quite a bit of uncollateralized Bitcoin,” Le said. “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 contributors. So I think we're in a pretty comfortable place where we are right now.”

Read in full https://fortune.com/2022/05/04/michael-saylor-microstrategy-margin-call-bitcoin/

Not far to go now, looks like that Margin call will be before July.  

https://www.investopedia.com/ask/answers/12/what-happens-cannot-pay-margin-call.asp

    A margin account allows investors to borrow funds from their broker in order to leverage larger positions with the cash they have available, boosting their buying power.
    A margin call occurs when the value of the account falls below a certain threshold, forcing the investor to add more money in order to satisfy the loan terms from the broker or regulators.
    If a margin call is issued and the investor is unable to bring their investment up to the minimum requirements, the broker has the right to sell off the positions and also charge any commissions, fees, and interest to the account holder.

If the Margin Call forces MicroStrategy into bankruptcy, all it's shareholders will be wiped out of their ownership of MicroStrategy.
Which includes : https://money.cnn.com/quote/shareholders/shareholders.html?symb=MSTR&subView=institutional

Latest Institutional Activity
3/31/2022   THE VANGUARD GROUP, INC.  Bought 235.3 Thousand shares of Microstrategy Inc
3/31/2022   RENAISSANCE TECHNOLOGIES LLC  Bought 86.3 Thousand shares of Microstrategy Inc
3/31/2022   BLACKROCK FUND ADVISORS  Bought 55.7 Thousand shares of Microstrategy Inc
Top 10 Owners of Microstrategy Inc
Stockholder   Stake   Shares
owned   Total value ($)   Shares
bought / sold   Total
change
Capital Research & Management Co....   14.81%   1,382,463   365,924,131   +43,838   +3.27%
The Vanguard Group, Inc.   9.25%   863,454   228,547,639   +235,330   +37.47%
Capital Research & Management Co....   6.67%   622,941   164,886,253   +34,945   +5.94%
BlackRock Fund Advisors   6.12%   570,713   151,062,024   +55,724   +10.82%
First Trust Advisors LP   2.43%   226,800   60,031,692   +54,911   +31.95%
SSgA Funds Management, Inc.   1.98%   185,047   48,980,090   +18,460   +11.08%
Geode Capital Management LLC   1.77%   165,066   43,691,320   +21,075   +14.64%
Morgan Stanley & Co. LLC   1.62%   151,379   40,068,508   -69,791   -31.56%
Morgan Stanley Investment Managem...   1.33%   123,984   32,817,325   -9,532   -7.14%
Norges Bank Investment Management   1.09%   101,658   26,907,856   -31,610   -23.72%
Top 10 Mutual Funds Holding Microstrategy Inc
Mutual fund   Stake   Shares
owned   Total value ($)   Shares
bought / sold   Total
change
American Funds Growth Fund of Ame...   9.37%   874,232   231,400,468   0   0.00%
American Funds Fundamental Invest...   4.59%   427,918   113,265,615   +43,920   +11.44%
American Funds Insurance Series -...   3.84%   358,514   94,895,071   0   0.00%
Vanguard Total Stock Market Index...   2.90%   270,451   71,585,675   +285   +0.11%
Vanguard Small Cap Index Fund   2.51%   233,840   61,895,110   +332   +0.14%
iShares Russell 2000 ETF   2.25%   209,845   55,543,873   +684   +0.33%
American Funds Insurance Series -...   2.19%   203,897   53,969,497   0   0.00%
First Trust Cloud Computing ETF   1.92%   179,508   47,513,973   0   0.00%
Vanguard Small Cap Growth Index F...   1.51%   141,053   37,335,319   -54   -0.04%
Vanguard Extended Market Index Fu...   1.31%   122,395   32,396,733   -229   -0.19%

Interesting, it looks like a collapse in the Price of BTC to <$21K could end up tanking a large % of the stock market.  

[Beparanf]

MicroStrategy holds crap ton of spot bitcoin on their balance sheets; they could just add more and more collateral so they wouldn't get liquidated. Unless we nuke far far below the $21k threshold, the risks for liquidation are virtually nonexistent.

Just imagine in the process they have so much bitcoins on the balance sheet that it would take only one point in future when bitcoin is reaching ATH and boom their investment for so many years will pass the vibe of holding profitability. That would be crazy Cool to see and let’s not forget this is also creating resistance for ourselves. The more they hold on to their bitcoins the more bitcoin is slower in dropping in terms of USD.

Microstrategy is a business and as a lot of fixed expenses including the interest for the loan. Yes it's easy to say they have a lot of Bitcoin on there balance sheet but the price of Bitcoin itself is killing there business overall. There investors will be feared of the liquidation happened and loss confidence to the company especially when bear market last longer than we expect. You guys is viewing the issue like microstrategy is a normal holder without any obligation to the company itself.

I hope the price will recover anytime soon and it will not hit the mark price because it might fuel a more bearish movement due to FUD.

[virasog]

I don't believe if this happens to them, firstly Michael Saylor is a long term investment, and as a long term player in the markets, he knew about the possibles risks of this market so he did consider the situation when the price falls down, even as someone who saw 3 market falls in the history of bitcoin I'm not really shocked to see this situation so I expect to see Michael Saylor having no plan for these days when the price is falling down, also even the price 21K cannot be a real red alarm for them because an official company they can add some collateral and even if they need more they will add more collaterals, I think he is even thinking about adding more bitcoins at current prices when the market bloody and everyone is selling.

If the bitcoin price falls below $21,000, this means that it would then fall below 19,800$, which was all time high in 2017. Bitcoin never dumped below the all time high of the previous bull market and if this happens, then it will be bad for the market.

Bitcoin has too much potential, I wonder why people are dumping their coins when there is nothing changed at the fundamental level 

[Fortify]

I am quite certain their position on taking a loan against their bitcoin to buy more bitcoin is safe because they have more bitcoin to deposit in their account to avoid a margin call. However, taking leverage by borrowing against a volatile asset to buy the same volatile asset is very risky. The real whales of the cryptospace, Sam Bankman Fried, Changpeng Zhao and Arthur Hayes and the cryptofunds who follow them can manipulate the market to liquidate Michael Saylor.

This is starting to look like a very troubling moment for bitcoin, lots of people got into it when it was higher and might be put off forever with this persistent dip taking place. To see such a large hedge fund facing large losses will also see them being a lot suspicious and wary about opening new positions in cryptocurrency in future - or stop them holding it long term in the future.

[OgNasty]

I believe I saw an interview where Saylor addresses this directly. It could probably be found on YouTube. I think he said the actual number where he’d be “margin called” the way that people think (forced selling) is somewhere below $4K. We may get to see exactly what happens and how truthful that is. Crazy how fast the market sentiment changed.