Bitcoin Collapse, Potential Margin Call from Microstrategy

Shares of Microstrategy (NASDAQ:MSTR) are swinging back in early trading on Monday as Bitcoin plunges below $24,000, getting closer and closer to the company's margin fill price for a loan. Shares had lost 25% in value at the last check.

On the first quarter conference call, the company was asked how low Bitcoin would have to fall for Microstrategy to receive a margin call. CFO Phong Le said it would have to drop to $21,000 to trigger a margin call or 50% LTV. Le also said that they can contribute more Bitcoin to the collateral package before it reaches 50%. Le said, “We took the loan at 25% LTV, up to where Bitcoin needs to go down, margin call occurs at 50% LTV. So essentially, Bitcoin needs to cut in half or around $21,000 before we can make a margin call. However, we can contribute more Bitcoin to the collateral package before it reaches 50%, so it will never get there, so we are not likely to enter a situation of March call." Le said that the loan was not taken for cash flow purposes and they took the loan primarily to be able to continue investing more in Bitcoin as well as to create a market for a Bitcoin-backed term loan.