Many crypto investors are accustomed to collateralized lending such as margin in a brokerage account, perpetual futures, DeFi loans, yield farms, and other secured loans. In trust-minimized ecosystems like crypto, borrowers must give lenders some type of assurance that they will repay and almost always, that assurance takes the form of collateral.
A collateralized loan usually has a liquidation price, a threshold that allows the lender to sell the collateral on an emergency basis to repay the borrower’s obligation before asset prices collapse further.
Using this mindset, investors see MicroStrategy’s $7.2 billion in debt and 439,000 bitcoin (BTC) in available collateral and automatically assume that the company must have some…
