MicroStrategy, a prominent corporate holder of bitcoin, suffered a loss on Monday when bitcoin fell below its average purchase price of $30,700.
Since the end of its recent relief rally in late March, the bitcoin price has declined by 20% in only 36 days. However, BTC has extended its losses over the last few days, falling 19.47% on 9th May and closing in around $30,000.
The red candle on the BTC/USD chart pushed MicroStrategy underwater, as the Nasdaq-traded business saw the price fall below $30,700 — the amount it spent on average for all of its over 129,000 bitcoin. Monday witnessed Bitcoin reach a low of $30,331, according to data from TradingView.
Bitcoin price is very volatile, with analysts divided over whether it is in a bull or bear market in June (Getty Images/iStockphoto)
In early April, MicroStrategy’s most recent bitcoin purchase was funded by a loan secured by bitcoin. The software analytics firm purchased 4,167 BTC for around $190,5 million at approximately $45,710 per bitcoin. However, owing to the loan, the firm risks having its margin call if the price falls below $21,000. By providing more BTC as collateral, MicroStrategy can avoid a margin call and be forced to liquidate a portion of the bitcoin backing the loan.
Tesla is likewise in the red, but for a longer duration than MicroStrategy since its average purchase price is significantly greater. According to BitcoinTreasuries, Tesla purchased 43,200 BTC for $1.5 billion in 2017. At press time, the cost per bitcoin for the electric vehicle manufacturer is around $34,700, resulting in an unrealised loss of 10% – almost $155,000,000.
It is uncertain how public businesses will respond if their bitcoin holdings see significant losses for an extended period.