A 4% increase in Bitcoin’s price can be attributed to MicroStrategy’s commitment to preventing a fall below $21,000.
Concerns about surrender have led MicroStrategy to reveal important details about the actions it intends to take in the event that the price strength of bitcoin drops.
The Bulls are pinning their hopes on history.
After reaching $37,600 on the evening of May 3, data from Cointelegraph Markets Pro and TradingView tracked the BTC/USD currency pair as it fluctuated between support and resistance levels.
A following bounceback caused the pair to clip $39,000 at the time of writing, offering respite to low-timeframe traders who were 4.1% off their lows from the previous lows.
On a broader scale, Bitcoin, on the other hand, remained rangebound and was subject to macro triggers while markets prepared themselves for Fed-induced turbulence.
On May 4, at 2:00 pm Eastern Standard Time (EST), the Federal Open Markets Committee (FOMC) meeting and press conference were scheduled to get underway.
Since there was little to reassure bulls, some of them went to historical analogies. The beginning of the last cycle of significant interest rate hikes that the Fed undertook in 2015 was a turning point for the strength of the Bitcoin price, which ultimately culminated in the blow-off high in December of 2017.
After bitcoin’s price climbed above $39,000, a well-known trader and analyst named Rekt Capital came to the following conclusion regarding the daily chart: “BTC is currently testing a multi-week resistance.”
If this level is broken, the multi-week bear trend will be finished, and $BTC will be able to experience an uptrend.
BTC/USD chart with annotations. According to the projections of Rekt Capital and Twitter MicroStrategy, the price of bitcoin will “never get” to $21,000.
Elsewhere, as the number of people calling for a “capitulation”-style event to usher in a new macro bottom on the BTC/USD exchange rate grew, the number of those making contingency plans became noticeably more vociferous.
MicroStrategy, the business that has the largest Bitcoin corporate treasury in the world, has gone as far as to indicate that it would increase the amount of Bitcoin that it purchases in the event that this scenario occurred.
Phong Le, the company’s president and chief financial officer, disclosed the terms under which the company will be subject to a margin call on its Bitcoin-collateralized loan while speaking on the company’s earnings call for the first quarter of 2018.
We took out the loan at a 25% LTV, and the margin call happens at a 50% LTV. “As far as where Bitcoin needs to fall, we took out the loan at 25% LTV.” Before we would have a margin call, Bitcoin would effectively need to drop in price by half, or to roughly $21,000,” he explained:
“That being said, before it gets to 50%, we could add more Bitcoin to the collateral package. This would ensure that it never gets there, so preventing us from ever having to deal with a March call scenario.”
Therefore, it seemed as though MicroStrategy was stating that it would actively support Bitcoin markets even amid a significant surrender. According to a recent article published by Cointelegraph, the most pessimistic BTC price estimates presently predict an amount between $25,000 and $30,000 in the future.
