Relevance up to 03:00 2022-06-16 UTC–4
Bitcoin and ether are in full readiness to break through their next annual lows, which can bring a lot of pain to already large players, not to mention speculators and those who trade using margin collateral. Most recently, an interview with Michael Saylor caught my eye, who may lose more than 1 billion investment funds in the coming days. He has already lost $ 6 billion once, so a new defeat for him will be just a minor nuisance.
In 1999, MicroStrategy, Saylor’s software firm, admitted to overstating its earnings and mistakenly reporting profits when in fact it had suffered losses. This reduced MicroStrategy’s market value by more than $ 11 billion in one day. Now, more than two decades later, MicroStrategy is once again facing questions about accounting practices – this time in connection with a $ 4 billion bet on bitcoin.
Considering that yesterday the world’s first cryptocurrency briefly fell below $ 21,000, a key level at which MicroStrategy will face problems in the form of margin collateral, which may force the company to liquidate its assets in bitcoin. The loss may amount to more than $ 1 billion.
Investing in cryptocurrencies turned out to be a risky game, as digital assets are now rapidly moving in step with the stock market and other risky assets falling amid concerns about a cycle of aggressive interest rate hikes by the Federal Reserve.
Now MicroStrategy has purchased cryptocurrencies worth $ 3.97 billion on its balance sheet. According to the company, as of March 31, MicroStrategy had 129,218 bitcoins, each of which was purchased at an average price of $ 30,700. Since bitcoin is currently trading at $ 21,200, this could result in unrealized losses of over $ 1 billion.
As mentioned above, MicroStrategy is now facing a so-called “margin call” – a situation where an investor has to invest more funds to avoid losses on a transaction. The company has already taken out a $ 205 million loan from Silvergate, a bank specializing in cryptography, to continue buying bitcoin. To secure the loan, MicroStrategy placed some of its bitcoins as collateral.
If bitcoin falls below $ 21,000, the company will be forced to fix losses, as it will have to sell most of its assets to meet collateral requirements. It is unclear whether MicroStrategy has received additional funds to secure the loan or not.
At the beginning of the month, Saylor said that the company has more than enough bitcoins to cover collateral claims. He added that the cryptocurrency should drop to $ 3,500 before it needs additional collateral. At the moment, the owner of the company has not yet commented on the fall of bitcoin below $ 21,000.
As for the short-term prospects, it is obvious that there are simply no people willing to buy even at current lows. To develop the initiative on the part of the bulls, active actions are needed in the area of $ 22,000, but before that, you need to try to return above the price of $ 21,700. Only a consolidation above this range will quickly return the trading instrument to $ 24,200, allowing investors to calm their nerves a little. A breakdown of the $ 20,700 level and another consolidation below this range will fail the trading instrument to a minimum of $ 19,200, and there you can reach up to $ 18,500 and $ 17,600.
As for the technical picture of the ether
No one is in a hurry to buy the bottom. The recent fall in ether has once again returned investors to a state of nervousness, as the trading instrument was one step away from breaking the psychological mark of $ 1000. It will be possible to talk about building an upward correction only after a breakout of $ 1,170, which will quickly return the ether to $ 1,282, and there is $ 1,406 very close, which will be a serious problem for traders. Only consolidation above will allow building an upward trend for the trading instrument with the prospect of updating the highs in the areas of $ 1,548 and $ 1,721. If the pressure on ETH persists, purchases in the area of the nearest support of $ 1,072 are not excluded. A break in this range will be the reason for a new collapse of the ether and a hike to $ 997. In this case, I advise you to count on new lows: $ 925 and $ 876, where the big players will start to act actively again.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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