Despite the growing concerns about the state of Microstrategy’s Bitcoin (BTC) position as the market continues to crumble, new research has shown that the company is still holding strong even in the face of turmoil with zero risk exposure unless BTC drops to $3,561.
The study, titled “The Health of MicroStrategy’s Bitcoin Bet, was conducted by Blockworks Research, a crypto-focused media firm, to uncover whether MicroStrategy has Bitcoin liquidation risks, the risk level, and the company’s debt structure.
MicroStrategy Holds Largest Bitcoin Portfolio
As one of the market leaders in the industry, MicroStrategy has the most prominent bitcoin position among publicly traded firms engaging with crypto assets.
The company holds approximately 130,000 BTC worth around $2. 08 billion in its balance sheet. However, the business intelligence firm did not only use the cash in its balance sheet to acquire the assets but also with debt, bringing about rising concerns from crypto proponents regarding its debt structure.
MicroStrategy Debt Structure
According to Block work’s research, the company held a total of $2.37 billion of its long-term debt in the third quarter ending September 30, 2022.
The debts comprised 2025 and 2027 Convertible Notes, 2028 Secured Notes, 2025 Secured Term Loans, and Other Long-term Secured Debt.
The breakdown of the debts includes $650 million convertible notes completed on December 11 2020. The fund has a fixed interest rate of 0.75%, payable semi-annually around June 15 to December 15 each year, with a conversion rate of $398 per share.
Despite a total debt of $2.37 billion, the study found that the company has no immediate liquidity risks until the bitcoin price trades below the $5000 mark.
MicroStrategy to Top Up Collateral or Face Liquidity
With a Bitcoin portfolio of 130,000 BTC bought at an average price of $30,000 per bitcoin, a total of 30,051 BTC worth around $480 million at the current price of $16,000 has been used as collateral for the 2025 secured term loan with Silvergate.
Recall that the company’s Subsidiary, MacroStrategy acquired a $205 million loan to increase its bitcoin holdings using part of the crypto asset purchased by MicroStrategy as collateral for the loan.
Due to the current market crisis, the company will need to increase its collateral on the loan if BTC drops further to $13,644 to avoid a margin call that requires the LTV ratio to be returned to 25% or lower.
Similarly, the company needs to top up its Silvergate loan if BTC drops to $3,561.
“In addition, 14,890 BTC are being used as part of its collateral for the 2028 Senior Secured Notes, leaving the company and its subsidiaries with 85,059 liquid BTC. Microstrategy would need to find external funding to finance its Silvergate loan at a BTC spot price of $3,561, or face liquidation,” reads the research.
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