Bitcoin shreds value: Will institutional investors HODL or sell?

While the cryptocurrency market continues to plummet, the CEO of institutional investment firm MicroStrategy has said that the firm will be HODLing strong through the crypto winter.

In a tweet, MicroStrategy’s CEO Michael Saylor restated the strategy for the investment firm, saying that they anticipated volatility in the market and will maintain the strategy as the leading cryptocurrency faces a bearish drop.

As part of its HODLing, MicroStrategy is looking at a current loss of $1.06 billion USD from Bitcoin’s decline. This is according to the data from Bitcoin Treasuries which monitors firms and their Bitcoin investments. As it stands, MicroStrategy has accumulated 129,218 Bitcoin and the current loss on its investment is around two-thirds of its total market cap.

Bitcoin price declines – can investment firms hold on?

However, Saylor has noted that the firm will continue to HODL, even if Bitcoin were to sink even lower. Right now, Bitcoin is sitting at $22,242.05 USD – which represents a massive 67.8% drop since November last year, when it saw its all-time high record of just under $70,000 USD. Over the course of seven days, the price of Bitcoin has shed nearly 30% of its value.

Saylor noted that MicroStrategy has contingency plans for its Bitcoin investment and that even if Bitcoin had to fall by 95%, there would still be collateral. This suggests that if Bitcoin were to fall below $3,500 USD, the firm would still have collateral to back the investment. In an interview with Yahoo Finance, Saylor spoke on the issue, saying:

“We started with $5 billion of unpledged collateral, we borrowed $200 million against it, so that’s a loan-to-value ratio of 4%. If Bitcoin fell 95% from that number the we’d have to post additional collateral.”

In addition to MicroStrategy, other institutions are also facing a decline in Bitcoin’s price. According to Bitcoin Treasuries, Tesla is also looking at a fairly substantial loss on its investment in Bitcoin. From its $1.5 billion USD investment, Tesla is currently facing an unrealised loss of $535 million USD.

Square, the payment network company headed up by Twitter’s Jack Dorsey, has taken a $40.8 million USD knock from its Bitcoin holding of $220 million USD.

 

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