MicroStrategy: From the Dotcom Bubble to the Big Loss of Bitcoin

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Saylor entered the crypto market in 2020, when he decided to add cryptocurrencies to MicroStrategy’s balance sheet as part of an unorthodox money management strategy

Having lost 6 billion dollars at the peak of the dotcom bubble, the Michael Saylor is accustomed to the volatility (and not only) of stock markets. The 1999, the share of MicroStrategy, Saylor’s software company, suffered an unprecedented sell off, as the profits it was showing actually turned out to be… losses.

Two decades later, MicroStrategy faces a new accounting problem, this time related to a bet, amounting to 4 billion dollars, on Bitcoin. No1. cryptocurrency worldwide has today slipped up to below $21,000, amidst the massive and unprecedented sell off in the markets.

With the value of digital currency hovering at these low levels, Saylor’s company is likely to face the risk of a “margin call“, which could lead to even greater losses. But let’s take things from the beginning.

Saylor entered the crypto market in 2020, when it decided to add cryptocurrencies to its MicroStrategy portfolio as part of an unorthodox money management strategy. His belief, after all, was quite endearing to the loyal “fans” of crypto: Bitcoin is an investment haven, which is not linked to the It is an investment refuge, a haven of refuge that is not connected to traditional financial markets.

This view, however, turned out to be a huge and dangerous leap of logic, as digital currencies were not unaffected by the run on “classical” assets. This is because they followed the massive liquidation of stocks and bonds, in fear of inflation and tightening monetary policy.

On Tuesday morning, albeit temporarily, bitcoin slipped 10% and reached as high as 20,843 dollars, the lowest level since December 2020. The new dip came as a result of the platform’s decision Celsius to stop the liquidations, citing market conditions.

MicroStrategy has bet a lot of money on the popular cryptocurrency. In fact 3.97 billion dollars. By March 31, in fact, it had 129,218 Bitcoin, purchased at the price of 30,700 dollars. each. This means that the current value of this investment adds up to $2.9 billion. Or in other words that the current amount of… losses is calculated in the amount of 1 billion dollars.

As if all this wasn’t enough, however, the American company is now facing the “margin call”, i.e. a situation in which the investor has committed certain additional funds in order to be able to repay any loan on a regular basis.

Months ago, therefore, MicroStrategy had received $205 million from Silvergate, in order to pursue aggressive purchases of Bitcoins. To secure the deal, he was forced to register some Bitcoins as collateral. And the value of these guarantees – despite the precipitation – should remain constant, through the payment of this margin call.

It is no coincidence, therefore, that the company’s stock is falling today by at least 25% in the New York pre-market, bringing the total losses in 2022 to 70% – an amount significantly higher than Bitcoin’s losses (50%).

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