Bitcoin Price Activity Causes Whales to Re-think Portfolio Allocation

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Bitcoin investments by prominent crypto whales suffer severe losses as the market has not recovered from the bearish shock that started in early 2022.
Bitcoin’s price actions may have caused some whales to rethink their strategies.
As of July 22, noted $BTC buyer MicroStrategy is holding 129,218 Bitcoin accumulated by the company since 2020, with an average purchase price of $30,700. With the Bitcoin price hovering around $23,000 at press time, MicroStrategy has lost nearly $1 billion, which equates to a 24% drop from the initial investment made by repeatedly issuing debt bonds to raise capital rather than using the company’s money directly.
However, MicroStrategy CEO Michael Saylor confidently said that the short-term downturn of Bitcoin is not a “big problem” for the company. He even affirmed that MicroStrategy would not sell Bitcoin despite the risk of liquidating the mortgage loan in BTC.
MicroStrategy has a $205M term loan and needs to maintain $410M as collateral. $MSTR has 115,109 BTC that it can pledge. If the price of #BTC falls below $3,562 the company could post some other collateral. See slides 11-12 in Q1 2022 presentation. #HODLhttps://t.co/9WHsIB6Usx
According to Michael Saylor, Bitcoin will have to drop by 95%, which is below $3,562, to be able to cause Microstrategy to run out of Bitcoin to repay the loan to Silvergate – the banking institution working with subsidiary MacroStrategy, which received a loan of 205 million USD in March 2022 to continue to buy another 190 million USD in Bitcoin.
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In a quarterly performance report on July 21, Tesla confirmed to have sold 75% of its Bitcoin investment, valued at $936 million. As a result, the company’s $BTC asset at the end of June 2022 was only 218 million USD, a sharp decrease from the previous $1.26 billion.
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 that Tesla is open to buying back BTC in the future, saying that the company’s decision to sell crypto assets should not be seen as their final stance on Bitcoin. In addition, Tesla Chief Financial Officer Zach Kirkhorn shared that the company is losing $106 million from its crypto investment with the remaining BTC holdings.
Elon Musk revealed the company had not sold any $DOGE. After temporarily suspending accepting Bitcoin payments due to concerns about environmental pollution, Tesla and Elon Musk have switched to supporting Dogecoin when accepting payments for some of the company’s products, intending to expand to SpaceX items as well.
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El Salvador made history on September 7th as the first country to adopt Bitcoin as a 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 criticisms, President Nayib Bukele remains firmly in favor of 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 is holding 2,381 Bitcoin. However, facing a downturn in market conditions, El Salvador lost $52 million, equivalent to a 47.58% decrease.
El Salvador bonds are also in a severe crisis with a somewhat reckless bet on Bitcoin. But, unexpectedly, one of the largest US banks, Morgan Stanley, has expressed a willingness to buy El Salvador bonds despite being among the worst performing bonds this year.
Morgan Stanley is ready to scoop up battered bonds from El Salvador, which are some of the worst-performing notes this year as the president’s bet on Bitcoin backfires.
The reason given by the bank was that El Salvador’s bonds were being overly 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.