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MicroStrategy Incorporated (NASDAQ: MSTR) recently increased its Bitcoin (BTC) holdings following a recent Silvergate Bank (NYSE: SI) loan repayment. According to reports, the BTC-loving business intelligence firm has bought an additional 6,455 Bitcoin for $150 million. The purchase, which also translates to an average price of $23,238 per token, brings MicroStrategy’s total Bitcoin holdings to 138,955 BTC. The company’s Bitcoin cache has an overall value of $4.1 billion at an average of $29,817 per token.
MicroStrategy’s latest Bitcoin purchase comes amid the ongoing recovery of the digital currency market. The company’s shares were up 0.9% in premarket trading today, March 27th.
Today, the mobile software and cloud-based services platform’s co-founder Michael Saylor announced that Microstrategy repaid its $205 million Silvergate loan. According to Saylor, a former MicroStrategy CEO, the company repaid the sizable loan to the failed bank at a 22% discount. By paying off the 2-year loan Silvergate loan, MicroStrategy also freed up 34,619 Bitcoin previously held as collateral. A regulatory filing with the US Securities and Exchange Commission (SEC) read:
“On March 24th, 2023, MacroStrategy and Silvergate entered into a Prepayment, Waiver, and Payoff to Credit and Security Agreement, under which MacroStrategy voluntarily prepaid Silvergate roughly $161.0 million (the “Payoff Amount”), in full repayment, satisfaction, and discharge of the loan and all other obligations under the Credit Agreement.”
The document further stated:
“Upon Silvergate’s receipt of the Payoff Amount, the Credit Agreement was terminated, and Silvergate released its security interest in all of MacroStrategy’s assets collateralizing the Loan, including the Bitcoin that was serving as collateral.”
The Silvergate loan was scheduled to mature in two years and bore interest equaling the SOFR 30-day average plus 3.70%. Three days ago, the floating rate equaled 8.27%.
MicroStrategy also generated more than $300 million amid its loan repayment, from the sale of its shares. According to the company, the sales took place between January 1st and March 24th this year. The MicroStrategy regulatory filing addressed the shares’ development, saying that”MicroStrategy had issued and sold an aggregate of 1,348,855 Shares under the Sales Agreement for aggregate net proceeds to MicroStrategy (fewer sales commissions and expenses) of approximately $339.4 million.”
The Virginia-based business intelligence company revealed that the proceeds from the share sales program fully funded the loan payoff. In addition, MicroStrategy said it offset the loan using $5 million in the MacroStrategy cash reserve account at Silvergate.
In early March, MicroStrategy denied having any assets custodied with Silvergate Bank. At the time, the company pointed out that there was no urgency in repaying the loan due to the far-off deadline. Citing the 2025 due date, MicroStrategy emphasized the loan terms would stay the same even in the face of possible insolvency.
Nonetheless, MicroStrategy also admitted at the time that it could attract more regulatory scrutiny due to Silvergate’s then precarious position.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
MicroStrategy, the world’s largest corporate holder of Bitcoin, has revealed it recently purchased more BTC.
The business intelligence company, founded by Bitcoin bull Michael Saylor, also announced on Monday that it had repaid the loan to the failed crypto-friendly bank Silvergate Bank.
Saylor, referencing his company’s latest SEC filing, said that MicroStrategy has now fully repaid the $205 million loan it borrowed from Silvergate in March 2022. The company reportedly cleared the loan principal with a 22% discount, with Friday’s payoff seeing MicroStrategy clear the collateralized loan at $160 million.
As a result, the company recouped its 34,619 BTC that had been pledged as collateral.
MicroStrategy also confirmed the purchase of 6,455 BTC, acquired for a total of $150 million and at an average $23,238 a coin. Saylor’s bitcoin strategy now includes a total Bitcoin haul of 138,955 BTC since the company’s first move in 2020.
So far, the total BTC holdings have been acquired at a cost of $4.1 billion, with each bitcoin purchased at the average price of $29,817.
MicroStrategy repaid its $205M Silvergate loan at a 22% discount. As of 3/23/23, $MSTR acquired an additional ~6,455 bitcoins for ~$150M at an average of ~$23,238 per #bitcoin & held ~138,955 BTC acquired for ~$4.14B at an average of ~$29,817 per bitcoin. https://t.co/ALp9VLkTpt
— Michael Saylor
(@saylor) March 27, 2023
Bitcoin currently trades around $27,809 while MicroStrategy shares closed at $256.67 on Friday and were 0.07% down at 9.10 am ET ahead of US markets opening on Monday.
Crypto-friendly bank Silvergate has announced plans to shut down in an orderly manner and fully repay all deposits.
Silvergate Capital has decided to shut down operations and liquidate its bank following effects of problematic market conditions. On Wednesday, the crypto-focused bank made the grim announcement, which also saw its stock plummet over 36% in after-hours trading.
In addition to ‘voluntarily liquidating’ in an ‘orderly manner,’ Silvergate also revealed that it would fully repay all deposits.
The announcement read:
“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward. The Bank’s wind down and liquidation plan includes full repayment of all deposits. The company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”
Silvergate also added it would “discontinue the Silvergate Exchange Network (SEN),” previously announced last week on its public website. However, the bank assured that all “other deposit-related services remain operational” amid the wind-down process. In addition, Silvergate committed to notifying customers of any further changes to the development.
Silvergate revealed Centerview Partners LLC as its financial advisor in its liquidation proceedings. In addition, the California-based crypto bank also disclosed that Cravath, Swaine & Moore would act as legal advisors.
Silvergate’s plan to shut down comes on the heels of discontinuing its SEN payments platform, considered one of its core offerings. Last week, the crypto-friendly financial institution also stated it would delay filing its annual 10-K for last year. The reason given was to sort out the business’ viability. However, Silvergate also revealed the delayed filing was due in part to a looming regulatory crackdown. This includes an investigation already afoot by the US Department of Justice.
Silvergate also ascribed the filing delay to Congressional inquiries, including investigations from its banking regulators. These regulators include the Federal Reserve as well as the California Department of Financial Protection and Innovation.
When Silvergate warned of impending insolvency, some crypto businesses, including Coinbase (NASDAQ: COIN) and Galaxy Digital, proceeded to sever ties with the embattled bank.
Silvergate, one of the two primary banks for crypto companies, has been struggling for months. For instance, the company laid off 40% of its workforce in January and reported a massive $1 billion net loss for Q4 2022. The loss resulted from the customer exodus Silvergate experienced at the end of last year, which drove deposits down 68% to $3.8 billion. The crypto-centric bank sold $5.2 billion in debt securities to cover these withdrawals.
In addition to its emergency liquidity injection and substantial staff downsizing, Silvergate also suspended plans to launch a digital currency. Furthermore, the bank wrote off the $196 million linked to its purchase of Diem Association from Meta (NASDAQ: META).
Silvergate currently has a little over $11 billion in assets, compared to the more than $114 billion worth of assets at Signature, another leading crypto-friendly bank.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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FDIC officials are reportedly looking at the books and records of Silvergate Bank and could provide a remedy for bank to come out of the turmoil.
Crypto-focused bank Silvergate Capital is facing a major crisis at its end and is looking for a way to stay in business. As per the latest reports, Silvergate Bank has been reportedly talking with the officials at Federal Deposit Insurance Corp thereby discussing ways to avoid a shutdown.
Sources familiar with the matter said that one possible option under consideration is lining up with crypto industry investors to boost its liquidity. The sources said that FDIC examiners visited Silvergate’s La Jolla, California, offices last week.
The lender is working out ways in order to get itself out of this financial turmoil that it faces. One of the sources also told Bloomberg that the top banking institution Federal Reserve had authorized FDIC officials to visit Silvergate’s offices. Representatives from neither Silvergate bank nor the FDIC have responded to Bloomberg’s questions.
However, the involvement by the FDIC clearly highlights the urgency that Silvergate is facing to come out of the mess. Last week, reports of possible insolvency for Silvergate Bank emerged thereby dragging the entire crypto market to the south.
After the collapse of the crypto exchange FTX in November 2022, Silvergate Bank started facing major operational challenges at its end. The bank has witnessed heavy withdrawals from its crypto customers and was forced to sell its securities to meet this liquidity demand.
As per its latest filings, Silvergate Bank’s deposits by December 31 stood at $6.3 billion. This was more than 50% down from the $13.2 billion in deposits by the end of September. As a result, the FDIC officials are reviewing the bank’s books and records, said sources.
The US regulators have been closely watching the developments panning out at Silvergate Bank. Prosecutors at the fraud unit of the US Justice Department have been looking into Silvergate’s dealings with FTX and sister group Alameda Research. So far, the bank isn’t facing any charges of wrongdoing.
The US regulators have fastened efforts to bring a regulatory framework for banks dealing with crypto firms. Interestingly, the developments have also drawn comments from Fed Chairman Jerome Powell. Speaking to lawmakers on the Senate Banking Committee, Powell said:
“Like everyone else, we’re watching what’s been happening in the crypto space, and what we see is quite a lot of turmoil. What we’ve been doing is making sure that the regulated financial institutions that we supervise and regulate are careful, are taking great care in the ways that they engage with the whole crypto space and that they give us prior notice.”
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
Last Friday, Bitcoin price lost $1,400 on news that it delayed filling a 10-K report. The stock crashed over 30% and triggered massive selling in the cryptocurrency market.
Inevitably, Bitcoin price was hit, as doubts over Silvergate’s future scared investors in the cryptocurrency market. Investors, however, are used to Bitcoin’s volatility. For example, the price is down -47.5% in the last 12 months and up 32.74% YTD.
It means that the reaction to Silvergate’s announcement might be just part of the coin’s volatility. But the worrying fact is that the price did not bounce back as bulls would have wanted.
Curiously, Bitcoin led the stock market losses. It used to be the other way around – Bitcoin following the S&P 500 index’s price action, but now the roles changed.
While Bitcoin price dropped last Friday, the stock market continued its recent rally. The two diverged.
Only yesterday, stocks crashed too, as the Federal Reserve’s Chair, Jerome Powell, testified in front of the Senate on the monetary policy. He said that recent data favors a higher terminal rate; thus, more rate hikes are in the pipeline. As a result, stocks crashed, and the US dollar rallied.
Bitcoin may have rallied in 2023, but the recent price action is bearish. The market dropped after a contracting triangle acted as a reversal pattern in late February.
Next, a consolidation started, which resembles a bearish flag pattern. Silvergate’s stock price crash completed the pattern, as Bitcoin price reacted.
Will the neckline of an inverse head and shoulders pattern offer support?
If it does, then Bitcoin is still not out of the woods, as momentarily, bears are in control. For a bullish setup, Bitcoin price needs to do two things.
First, to break above the bearish trendline. But only that is not enough.
Second, it must climb above the previous lower high in the $24k area. Can it do that?
The only way to do so is for risk sentiment in financial markets to turn on. If that is the case, all eyes should be on the stock market as a bounce there would support Bitcoin’s rally.
On the flip side, a drop below the head of the inversed head and shoulders pattern would open the gates for further losses.