Bitcoin Crash Again: Microstrategy Risks Margin Call

Another rain of sales hit Bitcoin over the weekend, with the leading cryptocurrency dropping to $33,500. Less than half of the peak reached in November 2021 at $68,990. What led to the violent decline likely reflects the massive selling in the stock markets once investors flee riskier assets.

Markets are now pricing Very aggressive monetary policy by the Federal Reserve, which at the last regular meeting raised interest rates by half a percentage point. The market euphoria continued a bit when Governor Jerome Powell announced that the Fed would not raise the cost of funds by three-quarters of a point in June, with Bitcoin temporarily crossing the $40,000 mark. In fact, the operators gave a different meaning to this input, that is, the US central bank will make it A series of half-point increments without stoppingat least until inflation is under control.

Crypto dynamics, in perfect harmony with stock dynamics, once again confirm how The relationship between the two asset types is very close And the function that Bitcoin has given as a hedge against inflation or as a safe asset in times of market turmoil is not very appropriate.

Bitcoin: MicroStrategy Might End up in a Margin Call

The Bitcoin crisis is likely to have detrimental effects on some companies like MicroStrategy that have bet without hesitation on the digital currency. The software company said last week during the quarter that if the bitcoin price drops to $21,000, The company can end up in a margin call.

Two months ago, the company led by Michael Saylor received a Bitcoin-backed loan from Silvergate Bank for $205 million, with the aim of buying more tokens. At the end of the same month, MicroStrategy acquired the cryptocurrency of . The equivalent of $5.9 billion.

This was said by Fung Lu, the company’s chief financial officer The company can contribute more bitcoins to the escrow package, so it would be very difficult to actually get into a margin call. Meanwhile, MicroStratey shares have lost 62% since Bitcoin reached an all-time high last November, while the stock is down 46% since the beginning of the year.

Bitcoin and fidelity plan

A hand could come to raise Bitcoin from Fidelity regarding their 401(k) retirement plan. The finance company plans to give employers a choice Allocate a portion of workers’ contributions to cryptocurrency. However, the initiative does not appear to be very successful at the moment, with only 2% in a recent survey of plan sponsors saying they would consider adding cryptocurrency in their 401(k).

The strongest concern comes from the fact that Employers can also be sued To offer a volatile investment like Bitcoin. The US Department of Labor can put significant pressure on industry in this regard. In March, for example, he said managers should expect to be questioned for explaining how including Bitcoin in retirement plans fits with their fiduciary duties.

The United States Congress is moving forward, but there is still a lot of confusion. Senator Tommy Tuberville reported last week that he is preparing to Bill Bans Department of Labor From Banning Bitcoin in 401(k) Plans. However, such legislation would face a mountain of hurdles in the Senate, with advocates such as Elizabeth Warren seriously questioning Fidelity’s plan and ready to take the fight.

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