A Bitcoin margin call. If the world’s leading cryptocurrency drops below $21,000, Michael Saylor’s MicroStrategy will be forced to pay up

Michael 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.

Saylor, an MIT graduate and the cofounder and CEO of the business intelligence firm MicroStrategy, has become a hero to the Bitcoin faithful ever since his company began stockpiling the cryptocurrency in August 2020.

The CEO has gone so far as to call Bitcoin “freedom,” and “the most universally desirable property in space and time.” And at Bitcoin 2022 Miami—the largest Bitcoin event worldwide—Saylor was met by thousands of cheering fans as he instructed the crowd to never sell their crypto.

Saylor’s Bitcoin appetite has grown so much that the CEO is now borrowing millions from banks to add more of the cryptocurrency to MicroStrategy’s balance sheet. The collateral? That’s right, more Bitcoin.

MicroStrategy added another $215 million worth of Bitcoin at an average purchase price of $44,645 per coin in the first quarter, SEC filings show, bringing its total holdings to 129,218 Bitcoins acquired for $3.97 billion, or $30,700 per coin.

At Bitcoin’s $39,800 price as of 4 p.m. ET on Wednesday, the company’s holdings were worth over $5.1 billion. The company’s market cap, on the other hand, is roughly $4 billion.

MicroStrategy has said it has no plans to sell its Bitcoin, and thus far, its buy-and-hold strategy has been profitable. But with Bitcoin’s price down roughly 35% in the past six months, that may be changing.

As 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 over 20% in the past month and nearly 65% from its February 2021 all-time high of over $1,000 per share.

And if Bitcoin’s value continues to fall, Saylor and company could face one hell of a margin call.

The margin call from hell

MicroStrategy’s CFO Phong Le explained in the company’s first-quarter earnings call on Tuesday 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.

“We took out the loan at a 25% LTV; the margin call occurs at 50% LTV,” Le said. “So essentially, Bitcoin needs to cut in half, or around $21,000, before we’d have a margin call.”

The CFO noted that MicroStrategy still holds “quite a bit” of uncollateralized Bitcoin that it could use to answer any potential margin call, however.

“As you can see, we mentioned previously we have quite a bit of uncollateralized Bitcoin,” Le said. “So we have more that we could contribute in the case that we have a lot of downward volatility. But again, we’re talking about $21,000 before we get to a point where there needs to be more margin or more collateral contributors. So I think we’re in a pretty comfortable place where we are right now.”

Still, taking out a loan collateralized by Bitcoin to buy more Bitcoin is a risky game. If the world’s leading cryptocurrency falls and a margin call goes through, MicroStrategy would be put in a tough spot. MicroStrategy did not respond to Fortune’s request for comment.

This story was originally featured on Fortune.com

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