Bitcoin price activity prompts whales to rethink portfolio allocation
Bitcoin investments by prominent crypto whales are suffering heavy losses as the market has not recovered from the bearish shock that started in early 2022.
MicroStrategy “vaporized” almost 1 billion dollars
Bitcoin’s price action may have caused some whales to rethink their strategies.
As of July 22, noted $BTC buyer MicroStrategy has 129,218 Bitcoins accumulated by the company since 2020, with an average purchase amount of $30,700. With the Bitcoin price hovering around $23,000 at press time, MicroStrategy has lost nearly $1 billion, which which equates to a 24% drop from the original investment made by repeatedly issuing debt bonds to raise capital instead of using the company’s money directly.
However, MicroStrategy CEO Michael Saylor confidently said that the short-term decline of Bitcoin is not a “big problem” for the company. He even confirmed that MicroStrategy would not sell Bitcoin despite the risk of liquidating the mortgage in BTC.
“When MicroStrategy adopted a long-term Bitcoin investment strategy, the company predicted future volatility and balance sheet structure to be able to continue holding Bitcoin in the most difficult times,” MicroStrategy CEO reassured the community on Twitter.
According to Michael Saylor, Bitcoin would need to fall by 95%, which is below $3,562, in order for Microstrategy to run out of Bitcoin to repay the loan to Silvergate – the banking institution that works with its subsidiary MacroStrategy, which received a loan of USD 205 million in March 2022 to continue until buy another 190 million USD in Bitcoin.
Tesla sells 75% of Bitcoin Holdings
In a quarterly earnings report on July 21, Tesla confirmed it had sold 75% of its Bitcoin investment, valued at $936 million. As a result, the company’s $BTC assets at the end of June 2022 were only 218 million USD, a sharp decrease from the previous 1.26 billion USD.
Tesla’s second quarter revenue also fell 9.7% to $16.9 billion compared to the first quarter, while profit was $4.2 billion, down 22.5% compared to the first three months of 2022. Tesla CEO Elon Musk stated that the company decided to sell Bitcoin to increase cash reserves because the COVID situation in China is affecting the company’s operations.
However, the world’s richest billionaire said Tesla is open to buying back BTC in the future, and said the company’s decision to sell crypto assets should not be seen as its final stance on Bitcoin. Additionally, Tesla CFO Zach Kirkhorn shared that the company is losing $106 million from its crypto investment with its remaining BTC holdings.
Elon Musk revealed that the company had not sold any $DOGE. After temporary suspend acceptance of Bitcoin payments due to concerns about environmental pollution, Tesla and Elon Musk have moved to support Dogecoin when accept payments for some of the company’s products, which intend to extend to SpaceX elements also.
Major challenge for El Salvador
El Salvador made history on September 7 as the first country to adopt Bitcoin as legal tender. However, several world organizations strongly opposed the move, including the International Monetary Fund (IMF), the World Bank and the Bank of England.
Despite all the criticism, President Nayib Bukele stands firm for Bitcoin. Since September 2021, Nayib Bukele has been public on his personal page about the Salvadoran government’s Bitcoin purchases. As of press time, the Salvadoran government holds 2,381 Bitcoin. But in the face of a downturn in market conditions, El Salvador lost $52 million, a 47.58% decline.
El Salvador bonds are also in serious trouble with a somewhat reckless bet on Bitcoin. But unexpectedly, one of the biggest US banks, Morgan Stanley, has expressed a willingness to buy El Salvador bonds despite it being among the worst performing bonds this year.
The justification from the bank was that El Salvador’s bonds were excessively sanctioned. Morgan Stanley warned that there was a possibility that the country would default, but also suggested that tightening global liquidity could make this impossible. So the country could still meet its obligations for another year without missing payments.
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