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But how much energy should a monetary system consume? This certainly sounds like a lot of energy. According to the Cambridge Center for Alternative Finance (CCAF), Bitcoin currently consumes around 110 Terawatt Hours per year - 0.55% of global electricity production, or roughly equivalent to the annual energy draw of small countries like Malaysia or Sweden. On the face of it, the question about energy use is a fair one. As cryptocurrencies, and Bitcoin in particular, have grown in prominence, energy use has become the latest flashpoint in the larger conversation about what, and who, digital currencies are really good for. But figuring out how much consumption is too much is a complex question that’s intertwined with debates around our priorities as a society. The calculation of which goods and services are “worth” spending these resources on, after all, is really a question of values. “So essentially, Bitcoin needs to cut in half, or around $21,000, before we’d have a margin call.How much energy does an industry deserve to consume? Right now, organizations around the world are facing pressure to limit the consumption of non-renewable energy sources and the emission of carbon into the atmosphere. “We took out the loan at a 25% LTV the margin call occurs at 50% LTV,” Le said. MicroStrategy’s CFO Phong Le explained in the company’s first-quarter earnings call on May 3 that if Bitcoin’s price falls below $21,000, or around 50% from current levels, it will be forced to pony up more cryptocurrency to back its $205 million Bitcoin-collateralized loan with Silvergate Bank that was used to buy Bitcoin in the first place. MicroStrategy has said it has no plans to sell its Bitcoin, and until recently, its buy-and-hold strategy had been profitable, but with Bitcoin’s price down roughly 50% in the past six months, the times are changing.Īs a result of its status as a quasi-Bitcoin ETF, and a pile of over $2.3 billion in long-term debt, MicroStrategy’s stock is down roughly 85% from its February 2021 all-time high closing price of over $1,000 per share.Īnd if Bitcoin’s value continues to fall, Saylor and company could face one hell of a margin call.
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The MIT graduate has become a hero to the Bitcoin faithful ever since his company began stockpiling the cryptocurrency in August 2020. Saylor is perhaps one of the most fervent supporters of Bitcoin on the planet-and that’s saying something, given the almost cultlike community behind the world’s leading cryptocurrency. If Bitcoin drops below $21,000, Saylor and company will be hit with a margin call, forcing them to pony up more of the leading cryptocurrency to maintain their loan even as the asset’s price tumbles. With prices for the world’s leading digital assets plummeting, the crypto faithful are at risk, especially MicroStrategy and its CEO Michael Saylor. The downturn came after the crypto lending platform Celsius announced on Sunday that it is pausing withdrawals, swaps, and transfers on its platform due to “extreme market conditions.”
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Cryptocurrencies saw their total market cap sink over $200 billion since last week with the world’s leading digital asset, Bitcoin, dropping below $24,000 for the first time since December 2020.