Crypto
Strategy's Overcollateralization Cushion Could Protect Against Bitcoin Price Drop
Michael Saylor, executive chairman of Strategy, formerly known as MicroStrategy, has addressed concerns about Bitcoin's price drop. He claims that even if Bitcoin falls to $5,000, Strategy's overcollateralization position will remain intact.
The company has issued Bitcoin-backed preferred securities with reported overcollateralization rates as high as 6x. This means for every dollar of obligation attached to those instruments, there are roughly six dollars of Bitcoin sitting behind it.
Saylor's argument is straightforward: most of that capital was never borrowed in the first place. Strategy has structured its exposure primarily through equity and preferred stock raises, not through debt that carries margin-call mechanics.