Bitcoin inch towards MicroStrategy’s doom price

Bitcoin has reached a price level that could force software firm MicroStrategy Inc to either sell some of its vast holdings or stake more tokens against a bitcoin-backed loan.

MictroStrategy is an aggressive investor in bitcoin. The company borrowed $205 million, a three-year loan, from crypto bank Silvergate Capital in March, to secure 19,466 bitcoins.

A Bitcoin price drop below about $21,000 would trigger a “margin call” or a demand for extra capital, MicroStrategy President Phong Le had said in webcast in May.

Today, Bitcoin fell below that level to $20,816.36 before steadying near $23,000.

Typically a margin call is met by providing more capital or liquidating the loan’s collateral.

MicroStrategy’s Le in May said the firm had 95,643 “unencumbered bitcoin” that it could use as extra collateral.

Bitcoin has fallen about 40% in six weeks. MicroStrategy shares fell 25% on Monday and Silvergate shares dropped 17% as fear of rising interest rates hit risky asset prices.