Microstrategy’s rescue plan for BTC

When the Federal reserve is about to make a statement, especially about interest rate rises, the Bitcoin community shudders. We have just seen this on 4th May. Yet, today, 5th May brings us a market that is green from end-to-end, with some altcoins making double digit gains (Tron surged by 14%).

Data shows that on 3rd May BTC/USD bounced between support and resistance after hitting $37,600, but a bounceback above $39,000 came fast enough. Still, something special needs to happen to lift Bitcoin above $40,000 and get over the hurdle of resistance at $43,000.

For the moment it is staying rangebound as the markets prepare themselves for Fed-induced volatility. Bulls looked to history for comfort, pointing out that the start of the Fed’s previous cycle of key interest-rate hikes in 2015 proved a turning point for BTC price strength, culminating in the December 2017 all-time-high.

Popular trader and analyst, Rekt Capital, said, “BTC is now testing a multi-week resistance.” Rekt also said that if Bitcoin could break out from the daily chart following the uptick above $39,000 then the multi-week downtrend is over and BTC/USD will see an upside.

The Microstrategy strategy

Other voices have been predicting that BTC will fall into the $20,000-$30,000 zone. But one company has a plan to avert that disaster and is being quite vocal about its contingency plan should it look like this might happen. The company is Microstrategy, which has the world’s largest Bitcoin corporate treasury. It says it will simply buy more Bitcoin to prevent that from happening.

Phong Le, the firm’s president and chief financial officer, revealed the conditions under which it would receive a margin call on its Bitcoin-collateralized loan: “As far as where Bitcoin needs to fall, we took out the loan at a 25% LTV, the margin call occurs 50% LTV. So essentially, Bitcoin needs to cut in half or around $21,000 before we’d have a margin call.” He added, “That said, before it gets to 50%, we could contribute more Bitcoin to the collateral package, so it never gets there.” He also stated that the firm had no intention of selling any of its considerable BTC holdings, and it appears to be prepared to support the crypto asset should there be any dramatic market capitulation.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top