All posts by Gabriella Gordon

MicroStrategy now has more than 129,000 Bitcoin, since the software company bought the cryptocurrency with debt in 2020.

However, the strategy of raising more debt than $2 billion to purchase speculative assets has one major risk: It can trigger a margin-call if bitcoin’s price falls below a certain point.

Phong Le, MicroStrategy’s chief financial officer, stated in Tuesday’s earnings call that if bitcoin falls to $21,000, it would have to make a margin call. This would be a 46% drop from the current level.

MicroStrategy was asked by the caller, “How far does Bitcoin have to fall in order for MicroStrategy receive a margin call from the Silvergate Loan?”

“As far as bitcoin’s future direction, we borrowed the loan at 25% loan-to value, and the margin call is [at] 50% loan to value. Le stated that bitcoin must be cut in half, or approximately $21,000, before we can make a margin call.

MicroStrategy may not have to sell its bitcoin for less than what it paid when it adds collateral to its loan. “Before it reaches 50%, we could add more bitcoin to the collateral package so that it never gets there. So we don’t get into a position of a margin call.”

In March, MicroStrategy took out a $205 million bitcoin-collateralized loan with Silvergate Bank to purchase more bitcoin. The average cost basis for the software company’s bitcoin holdings is about $30,700. CEO Michael Saylor stated earlier this year that he does not plan to sell MicroStrategy’s bitcoin stash.

MicroStrategy trades at a $4.4 billion market valuation, which means the stock is trading at an undervalued discount to its crypto holdings. This signals that investors might be uneasy about its billions in debt, its slowing software business and its exposures to volatile assets.

MicroStrategy’s stock prices have closely mirrored bitcoin’s, to the point that some consider it an ETF quasi-bitcoin, since there is no bitcoin ETF approved in the US.

MicroStrategy’s stock prices are currently affected by the bitcoin price. This is 44% lower than November’s record high of $69,000. MicroStrategy stock has fallen 62% since November’s bitcoin peak and is down 37% over the past year.

According to Ripple, the head of the blockchain company Ripple, ‘Tribalism’ around bitcoin and other cryptocurrency is holding back the $2 trillion global market.

Ripple CEO Brad Garlinghouse stated that “Polarization isn’t healthy in my judgment,” during a CNBC-hosted fireside conversation at the Paris Blockchain Week Summit last Wednesday.

“I own Bitcoin, Ethereum, and I have some other assets. This industry will continue to prosper is my belief.

Garlinghouse said that all boats can rise.

Garlinghouse is a former Yahoo executive who compared today’s crypto industry to the dotcom era in the late 1990s/early 2000s.

‘Yahoo and eBay could both be successful,’ he said. He said that they solve different problems. “There are different uses, different audiences and different markets. Many of these parallels are still apparent today, I believe.

According to CoinGecko data, there are currently tens of thousand of cryptocurrencies in circulation. They total $2 trillion.

Some digital coins have attracted a large following, not least bitcoin. Bitcoin’s hardcore supporters are often called’maximalists’.

Twitter founder Jack Dorsey, and microStrategy CEO Michael Saylor were among those so-called maximalists that support only bitcoin.

Garlinghouse stated that such maximalism has led to a crypto industry with ‘fractured representation’ when lobbying U.S. lawmakers.

President Joe Biden signed last month an executive order requesting that the government examine the benefits and risks of cryptocurrency.

He said, “The lack of coordination between the crypto industry and Washington, D.C., is shocking.”

Ripple is frequently linked to XRP, which the company uses for cross border payments.

The majority of the 100 billion XRP tokens are owned by the company. It releases them from an escrow account periodically to maintain stable prices.

Ripple is in Court with Securities and Exchange Commission. The company was accused of illegally selling more than $1 billion in XRP through an unregistered securities offer. The company argues that XRP should not be considered a security but a virtual currency.

At the Bitcoin 2022 conference, Michael Saylor, CEO of MicroStategy and Cathie Wood CEO at Ark Invest argued that Bitcoin has never seen a more positive environment.

Saylor and Wood look at the current landscape through lenses that focus on regulatory issues and the macroeconomic environment. They also see a future where the capital markets will accept bitcoin regardless of what happens. Wood reiterated a prediction by her firm, that each bitcoin would be worth $1,000,000 by 2030.

The talk focused on the positive attitudes of previous bitcoin skeptics to the asset. Wood spoke out about what she considered a significant change for Treasury Secretary Janet Yellen. Her public speeches and commentary have repeatedly warned of the negative consequences of bitcoin and digital assets on financial markets and consumer welfare.

In a recent interview with CNBC, she stated that crypto has grown rapidly and now plays a significant part in not only transactions, but also in investment decisions for many Americans…There are some benefits to crypto and we recognize that innovation in the payment system may be a good thing.

Saylor stated that he saw President Biden’s recent executive order, which required government agencies to examine digital assets and evaluate their potential, as the green light for Bitcoin. He said that he does not know if the President of the United States has ever directed the government’s acceptance of a new asset type.

Saylor then turned to capital markets and recalled an incident where analysts at Merrill Lynch mocked him when he said that he wanted bitcoin to be bought with MicroStrategy funds. “They laughed at me, and said that they would not sell it to them, but that we wouldn’t be allowed to discuss it, or else we get fired.” He told the audience that he wired $175million out of the bank quickly. The ultimate vindication was that his inbox contained bitcoin research from Merrill Lynch that was sent to him by the same broker. As if we are covering it now. This is how we think. Every bulge bracket farm has started to cover it.

Both Wood and Saylor see bitcoin as an important hedge and store-of-value in today’s macroeconomic environment. This is amidst rising inflation and uncertainty due to the growing impact of sanctions against Russia and ongoing coronavirus outbreaks around the globe. Saylor noted that, even though the issues are unfavorable for the world, they all highlight the need for a global, non-sovereign store value like bitcoin.

Both see bitcoin as a long-term success, but the asset is vulnerable to macroeconomic headwinds in the short-term. Wood believes it is a fallacy for investors to place bitcoin in tech stocks (which are currently struggling) hoping that the correlation will decrease over time as the asset becomes more accepted.

Bitcoin’s recent struggles include a drop of 5% from $47,000 to $43,375 at 12:08 ET.

Changpeng Zhao (CEO of Binance), a global cryptocurrency exchange, met today with President Nayib Buukele of El Salvador, to discuss various investment opportunities through Bitcoin.

Binance is supporting El Salvador in its execution of Bitcoin as a legal tender, and the issuance bitcoin bonds.

Zhao tweeted that the meeting was ‘fantastic’ and added that they didn’t talk about bonds. “The word never came up. There is so much to talk. His tweet said #adoption.

This meeting is significant because earlier this week, Alejandro Zelaya, El Salvador’s Finance Minister, stated that the country had delayed its $1 billion bitcoin bond issue, originally scheduled for March 15-20. It was postponed due to unfavorable market conditions.

He had said, “I believe this is not the right time, there are moves on the planet,”

Milena Mayorga (Ambassador of El Salvador to America), and other investors were also present at today’s meeting.

Ricardo Salinas Pliego (a Mexican businessman who is also a Bitcoin holder) tweeted that it was a pleasure to meet with you President. He said, “It has been an honor to meet you today in El Salvador. Freedom is what will allow us to evolve as civilizations. #Bitcoin, I’m sure, is that currency. Hug and see you soon, thank-you! !!.’

El salvador was the first country to allow bitcoin legalization, in September 2021. The country also plans to create the first Bitcoin City in the world, which will be funded initially with bitcoin-backed bonds.

Zhao had previously praised El Salvador’s pioneering role in bitcoin adoption, and added that the presidency of Bukele would be regarded as heroic for its bold bet on future.

Bukele also voiced his dissatisfaction at the US Senate proceedings. On Wednesday, a Bill to reduce the risks to the American financial systems from El Salvador’s adoption (BTC), was passed out.

“Never in my wildest dreams could I have imagined that the US government would fear what we are doing here. He tweeted that the US government does not stand for freedom, and it is a well-known fact.

It is interesting to note that President Bukele tweeted last month that the bill had been introduced. He said, “OK boomers… You have zero jurisdiction over a sovereign, independent nation.” We are not your colony or your backyard, nor your front yard. Keep out of our internal affairs. Do not try to control what you cannot control.

According to an announcement posted on the Thai government’s website, Tuesday saw new tax relief in Thailand for crypto trading.

Finance Minister Arkhom termpittayapaisith, and Deputy Minister Finance Santi Prompat jointly revealed the results of the meeting. They confirmed that the cabinet had approved the crypto tax relief measures.

A news conference was held by the finance minister. It was revealed that traders will be allowed to offset annual losses with gains for tax due on crypto investments. Transfers of crypto tokens or cryptocurrencies will be exempted from the value-added tax (VAT), of 7%.

He also stated that the tax exemption will apply from April 2022 through December 2023 and include the trading of digital currency (CBDC), issued by the Bank of Thailand, as well as the retail central bank of Thailand.

The Thai Revenue Department released last month a guide that outlines the new tax rules for cryptocurrencies and digital tokens. An executive from a Thai cryptocurrency exchange said that the new tax rules were’much friendlier to both investors as well as industry’.

Thailand had previously proposed to impose a 15% tax on cryptocurrency transactions. After industry opposition, the plan was abandoned.

The country’s cryptocurrency trading market has seen a significant increase in the last year. According to a finance ministry official, the number of accounts for crypto trading in Thailand has increased from 170,000 in the previous year to around 2 million by 2021.

The Stock Exchange of Thailand announced last month its plans to create a digital asset trading platform.