Responding to concerns about “margin calls”, the CEO of MicroStrategy claims that the company can withstand bitcoin fluctuations.

Responding to concerns about "margin calls", the CEO of MicroStrategy claims that the company can withstand bitcoin fluctuations.

After the price of the cryptocurrency fell to levels that raised concerns about a potential liquidation of its leveraged position, MicroStrategy CEO Michael Saylor stated on Tuesday that the software company was able to endure price volatility.

If the bitcoin price dropped below about $21,000, it would trigger a “margin call” or demand for extra capital, MicroStrategy President Phong Le said in webcast in May. Bitcoin fell below that level to $20,816.36 on Tuesday before steadying near $22,000.

The aggressive bitcoin investor MictroStrategy reported borrowing $205 million from the cryptocurrency bank Silvergate Capital in March. The three-year loan was primarily secured by 19,466 bitcoins.

Typically a margin call is met by providing more capital or liquidating the loan’s collateral. It was unclear if the price moves had any consequences for MicroStrategy, or if the firm already provided more bitcoin or cash to secure the loan.

A spokesperson for Silvergate declined requests from Reuters for comment. MicroStrategy shares rose 6% and Silvergate gained 3% on Tuesday, following 25% and 17% tumble on Monday in line with a pullback in crypto assets.

The company did not respond to requests for comment. MicroStrategy had “anticipated volatility and structured its balance sheet so that it could continue to #HODL through adversity,” Chief Executive Officer Saylor said in a tweet on Tuesday.

MicroStrategy’s Le said in May that the firm had 95,643 “unencumbered bitcoin” that it could use as extra collateral. Based on bitcoin’s last traded price of $22,254, the value of those coins was $2.1 billion.

“We could contribute more bitcoin to the collateral package, so … we don’t get into a situation of a margin call,” he had said. Mark Palmer, head of digital asset research at BTIG, downplayed the risk of a margin call forcing MicroStrategy to trim its holdings.

“We see no circumstance in which MicroStrategy is going to need to sell any of its bitcoin holdings,” he said.

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