MicroStrategy’s (MSTR.US) founder and CEO Michael Saylor’s big bet on bitcoin has had major consequences, with paper losses on the firm’s bitcoin holdings reaching roughly $1 billion.
It is reported that in the past two years, MicroStrategy has accumulated nearly 130,000 bitcoins and spent a total of 3.97 billion US dollars. According to the company’s latest quarterly filing with the U.S. Securities and Exchange Commission (SEC), the company’s average purchase price for bitcoin has risen steadily since 2020, to $30,700 per coin as of March 31.
Affected by expectations of aggressive interest rate hikes by the Federal Reserve and rampant inflation, Bitcoin plunged more than 17% on Monday, falling below $24,000, its lowest level since December 2020. As of press time, Bitcoin fell another 8.92% to $21,193.77 per piece. Affected by the Bitcoin slump, MicroStrategy’s current Bitcoin holdings are worth just over $3 billion, implying an associated loss of nearly $1 billion.
MicroStrategy shares tumbled about 25 percent to $152.15 on Monday. The company’s stock has been highly correlated to Bitcoin since Michael Saylor began adding Bitcoin to the company’s balance sheet in August 2020 as a hedge against inflation.
For MicroStrategy, if bitcoin prices fall further, the company may need to provide additional collateral for the $205 million loan it took out in March. MicroStrategy said on a conference call in May this year that if the price of bitcoin fell to about $21,000, they would need to invest more than the $820 million they originally committed.