Short Sellers Profit As Bitcoin’s Drop Moves MicroStrategy Dangerously Close To Collateral Call

In the last 24 hours, Bitcoin has fallen 15% to $24,200. This is great news for Ryan Ballentine (35), a short-seller at the Maryland investment company Bireme Capital. His $60 million small fund bet against MicroStrategy stock, a publicly traded business research software company that has nearly 130,000 bitcoin. It is worth approximately $3 billion today.

Many investors have turned to Tysons, Virginia-based Microstrategy as a leveraged proxy for Bitcoin, since there is no SEC-approved exchange-traded Bitcoin fund. Its stock rose from $145 in August 2020, to more than $1,000 at its peak of February 2021. It trades today at $146 per share. This is 73% lower than the S&P 500’s decline of 43% and 21% respectively.

Halfway through the meteoric rise, the stock was trading around $700. Bireme Capital noticed something was wrong and placed a bet against the company crypto enthusiasts were falling in love. Short selling was a risky strategy that involves borrowing stock to sell it at a high profit in the hope that it will be available for purchase at a lower price. Bireme finally has its moment in the sun after Microstrategy shares plummeted.

Ballentine, CEO of Bireme Capital and co-founder, says that “I believe there’s many people who think MicroStrategy also is a zero.” Before they bought bitcoin, it had an enterprise value of approximately $700 million. They now have a loss of a billion dollars on bitcoin. We believe the numbers are zero even at current Bitcoin prices.

Bireme, a small investment management company for high-net worth individuals, was founded in 2016. The firm began to bearishly view tech stocks in the summer and autumn of 2020, adding shorts such as “crypto-hype Stock” Overstock.com, and finally so-called meme stocks like AMC, which “have a meme-premium built into, that we were happy taking the other side of,” according to Ballentine. Ballentine says that it is easy to see the absurdity of many of these short positions by running the numbers.

Bireme has devoted $37 million, or 62% of its capital, to what it calls “fundamental value strategies”, which seeks out investor biases in order to identify misvalued opportunities for U.S. equity equities. Bireme initially targeted Microstrategy, committing $400,000 to the shorting of the firm at a nominal rate of less that 1% from Interactive Brokers. Ballentine sees the low interest rate as a sign that not many, if any, were doing so at the time.

A month later, the firm doubled the size of its short position. Ballentine believes that the increase in short-sellers of Microstrategy stocks has been evidenced by the fact that the interest rate to borrow them had peaked at 14%. It is becoming increasingly difficult to find Microstrategy stocks to shorten.

According to Bloomberg, the short interest in Microstrategy now amounts to roughly 3.5million shares or 35% of the total floating, up from 1.7 million at its beginning. According to a CoinGape report, Jim Chanos, a legendary short-seller, said that Microstrategy’s “core business isn’t worth much” earlier this month. Ballentine, whose company has so far earned $420,000 in unrealized profits, says that “we had a large profit on our short situation.” He said, “We actually added the short position.” “We believe it’s zero.”

Evan Tindell (37), Bireme cofounder and chief investment officer, says that “we saw the potential for such a downward spiral.” It happens whenever you borrow money to purchase volatile assets. The pricing is at your mercy and margin calls could lead to further downside.

According to Microstrategy’s first quarter earnings report, the average price for its 129,218 Bitcoin was $30,700. His firm also reported that it had purchased an additional $205million worth of Bitcoin via a loan from Silvergate Bank. This loan used 19,466 bitcoin as collateral. The price dropped below the average in May for the first time since two years.

Despite panicked reports warning of Microstrategy’s imminent collapse, Saylor and SEC filings confirm that the loan, officially known as Microstrategy subsidiary Macrostrategy is still in compliance with its covenants, so long that bitcoin prices don’t drop below $21,000 MicroStrategy was close to taking action when Bitcoin’s recent plunge to $23,200 put it at risk of being forced to add more bitcoin to its loan reserves. According to SEC filings the loan-to-value ratio for Silvergate’s $205 million loan must not exceed 50%. Saylor states, “We will generally test every single day at the end-of-the-day to see if we have a collateral calling.” “And then, we’ll keep ahead of that.”

Ballentine says, “I believe Michael Saylor completely when he stated that he believes in the long-term prospects for Bitcoin.” To fully secure the subsidiary, they will need to deposit additional Bitcoins or dollars.

Ballentine says, “We are agnostic about the long-term worth and utility of bitcoin because at end of the day Bitcoin could still be extremely useful and MicroStrategy may still go bankrupt.” “Like these two things aren’t mutually exclusive it doesn’t say anything about how valuable the technology is or where we’re going, in terms the utility of Bitcoin in the global marketplace.”

Soros Fund’s CEO: Recession Is Inevitable and Crypto Is Here to Stay

Dawn Fitzpatrick is the chief executive officer and chief investment officer at Soros Fund Management. This interview was aired Tuesday by Bloomberg. Soros Fund Management was established in 1970 by George Soros with Jim Rogers, his ex-business partner.

Fitzpatrick was asked her opinion on crypto. She responded to a question about Fidelity’s announcement that bitcoin investments could be allowed in retirement accounts 401(k).

It is here to stay. It’s mainstream, I believe.

“The executive said that ethereum would gain more traction than bitcoin, but there was one caveat.

She also mentioned that “the blockchain technology will have some great uses.”

Fitzpatrick’s U.S. Economy and Recession

Chief of Soros Fund Management shared her views on reports that the U.S. economic growth slowed in the first quarter. “When you look at the GDP number, the most important point is that net imports were negative. This means that we are importing lots of goods from overseas. This is because of strong consumer and corporate demand. She explained that there is a silver lining to the GDP reading.

Fitzpatrick responded to a question asking if she believes a recession is imminent.

A lot of talk has been made about the imminent recession. The bottom line is that a recession is almost certain. It’s just a matter of when.

The Soros Fund executive stated that high inflation and the Federal Reserve raising interest rate said that there was no doubt that interest rates would rise and that the Fed would move quickly. However, interest rates net inflation are still negative so monetary policy remains very easy.

She said, “I don’t believe we’ll avoid another recession.” It will likely be farther out than people think.

MicroStrategy Recruits New CFO Amid Bitcoin Push, Wider Losses

MicroStrategy Incorporated, one of the few crypto-holding companies, has named a new finance chief. This comes after the analytics-software company said last week that it would allow employees to invest their 401(k funds in bitcoin.

MicroStrategy, Tysons Corner, Va., announced Tuesday that Andrew Kang will be its next chief financial officers, with effect from May 9. Mr. Kang was previously the CFO at GreenSky Inc. home-improvement lender GreenSky Inc. and will succeed Finance Chief Phong L. Mr. MicroStrategy stated that Le, who had been in the position since July 2020, would remain president.

Before joining GreenSky, which Goldman Sachs Group Inc. purchased in March, Mr. Kang was a corporate treasurer for Santander Holdings USA. This bank-holding company. He held finance and Treasury positions at several banks.

MicroStrategy reported that revenue dropped 2.9% to $119.3million in the first quarter compared to the previous-year period. The quarter’s net losses increased to $130.8million from $110 million in the previous year, partly due to an impairment charge related the bitcoins.

Along with Block Inc., a payment company, and auto maker Tesla Inc., the company is one of a few businesses that have substantial bitcoin holdings. MicroStrategy reported that it had $2.9 billion in cryptocurrency book value as of March 31 compared to $1.95 billion one year ago.

The company reported last month that it had purchased approximately 4,167 bitcoins at $190.5 million cash, bringing its total bitcoin holdings to 129.218.

MicroStrategy announced that it would allow its employees to invest part of their retirement savings from 401(k), in bitcoin under a new offering by financial-services giant Fidelity Investments Inc.

The Securities and Exchange Commission sent a January letter to MicroStrategy requesting that it revise how it discloses its Bitcoin holdings in future filings. When it applied measures that were not consistent with U.S. generally accepted Accounting Principles (GAAP), the firm was able to remove bitcoin trading volatility. Mr. Le had previously told the SEC that such impairment losses could distract investors from analysis of company’s operating results. However, the company changed its disclosures accordingly.

Although Mr. Kang is a strong financial professional, it will take him some time to transition into software, according to Brent Thill, a senior analyst with Jefferies Group LLC. This financial-services company.

“His job is to keep the company focused on core operations, rather than being distracted by bitcoin,” Mr. Thill stated.

Survey: Adoption in Argentina Grows, With 12 out of 100 Adults Having Invested in Crypto

Recent shared data from Americas Markets Intelligence shows significant growth in cryptocurrency adoption Argentina. A survey of 400 people via smartphones was conducted last year and found that 12 percent of 100 Argentinians had made investments in crypto. This number is lower than other South American countries’ statistics. Brazil had an adoption rate of 7% and Mexico, 6%.

This country also had a higher adoption rate than the Latam average of 8%. This can be explained by several factors. The country’s economic characteristics, which have seen inflation and monetary restrictions for many years, are the main reasons. The adoption rate in Argentina is lower than the 16% in the U.S.

The Growth Factors

The study examined the reasons why Argentina’s growth was greater than that in South America. identified three factors that could explain the crypto boom in the Argentinian and Latam Markets. First, the high level of digitalization in these societies compared to low levels of bank adoption. The report says:

The persistent mistrust of banks has slowed the growth of digitalization and kept cash in use even though consumers are more comfortable using digital tools.

The inflation and high monetary volatility of the country are another important factor. This makes cryptocurrencies such as bitcoin and ethereum attractive investments and savings options, even though they can be highly volatile. Third, remittances. This is the 5.5% that Argentinians must pay to send or receive remittances. This is because cryptocurrencies allow users to move funds almost without any fees.

Study also suggests potential for the future growth and use of crypto as an investment product. 18% of those surveyed indicated that they are interested in investing in cryptocurrency in the future. 54% of those surveyed stated that crypto-currencies are a great way to protect their savings.

Bitpay Adds Lightning Network, Youth Fashion Brand Pacsun to Accept Payments via Lightning

Bitpay now allows bitcoin payments via Lightning Network (LN). This is to enable bitcoin users to pay using the second layer network of the crypto asset. Bitpay previously accepted bitcoin ( BTC) via the onchain. This was in addition to bitcoin cash, ethereum and wrapped bitcoin. Bitpay claims that merchants and users can now use the LN payment rail to access wallets such as Cashapp or Strike.

The company announced Wednesday that consumers now have a low-cost option when paying with Bitcoin at Bitpay-enabled merchants. According to the announcement, merchants do not need to make any changes to accept LN payments. The Atlanta-based crypto payments firm explained that customers will only need to select from more than 100 LN-enabled wallets.

Tony Gallippi (Bitpay co-founder), stated in a statement that ‘Bitpay’s integration with Lightning Network gives customers more choices and merchants more options to be paid using blockchain technology. Bitpay announced that Pacsun, a youth-focused retailer of clothing, will become the first merchant to accept LN payments through the integration.

On October 5, 2021, Pacsun announced that it would accept 11 cryptocurrency assets via Bitpay. Pacsun stated that it was seeing a growing demand for cryptocurrency payments and had made the announcement on October 5, 2021. Mike Relich, Pacsun’s co-CEO, stated that Pacsun was excited to become one of the first Bitpay Partners to accept bitcoin payments via the Lightning Network. Relich added:

Lightning Network [support] offers our customers instant payments and extremely low network fees. It also gives Pacsun more opportunities for bitcoin holders to shop online at Pacsun.

The Lightning Network, a layer 2 (L2) payment protocol, was created by Joseph Poon in February 2015 by Thaddeus dryja. There are both advantages and disadvantages to the L2 network. Some of its benefits include privacy, granularity enhancement and speed. The L2 routing network’s total value locked (TVL), at the time of writing is approximately $164.6 Million or 3,700 .