Essential Insights
- The Bitcoin hedge of Strategy is approaching its average purchase price as BTC falls over 30% from its peak.
- The company might be compelled to liquidate some of its Bitcoin holdings to fulfill financial commitments.
- Critics have long warned that Strategy’s approach to accumulating Bitcoin using debt could lead to significant issues during prolonged downtrends.
Strategy (previously known as MicroStrategy) is under increasing scrutiny as its substantial Bitcoin (BTC) reserves approach breakeven.
With Bitcoin having dropped over 30% from its peak, the firm’s average BTC acquisition cost of $67,549 is becoming a pressing concern.
Strategy Under Pressure with Unrealized Losses Approaching $4.6 Billion
The Fortune 500 entity has accumulated 275,965 BTC since November 2024 at an average price of $93,228. With Bitcoin trading near $77,471 at the time of reporting, this position represents a staggering $4.6 billion in unrealized losses.
An 8-K filing submitted to the Securities and Exchange Commission (SEC) indicates that Strategy may need to sell parts of its Bitcoin assets to meet financial responsibilities.
Without securing new financing through equity or debt, a sale—potentially at a loss—might become necessary.
“If we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell Bitcoin to satisfy our financial obligations,” the filing states. “We may need to conduct such sales at prices below our cost basis or under other unfavorable conditions.”
This disclosure resonated deeply within the crypto community as Strategy co-founder Michael Saylor’s constant mantra has been, “Never sell.”
Saylor has framed the firm’s Bitcoin treasury as not just a financial investment but a philosophical stance against inflation and the devaluation of fiat currencies.
In 2024, when critics voiced concerns over the increasing debt and susceptibility to Bitcoin’s volatility, Saylor brushed off the risks. “Bitcoin could go from $100,000 to $1,000,” he stated at the time . “The debt is not going to be called; there is no recourse.”
However, the latest filings indicate a shifting reality.
Trust Dims as the “Never Sell” Philosophy Faces a Test
At present, Bitcoin sits just 13% above Strategy’s average acquisition cost. Should the price dip below that threshold, it could initiate a domino effect—potentially impacting both the company’s financial standing and its stock value.
The implications are not solely financial. Strategy’s steadfast “no-sell” directive has been a foundational principle for institutional Bitcoin advocates. Any reversal could shake confidence among corporate treasuries holding BTC and exacerbate volatility in an already delicate market.
Nathan Chiron, chief revenue officer at iExec, perceives the psychological implications of a sell-off as substantial.
“Michael Saylor’s ‘never sell’ doctrine has been integral to the company’s identity, serving as both a brand ethos and strategic conviction,” Chiron remarked. “If Strategy begins to divest, it would not only indicate a significant psychological shift for institutional Bitcoin stakeholders, but it could also trigger near-term volatility and diminish trust in corporate HODL strategies.”
Chiron stressed that any such action wouldn’t inherently signify a loss of belief but would reflect “pressure from skeptics compelling a fear-driven decision.”
Mithil Thakore, co-founder and CEO of Velar, added that volatility is an essential aspect of Bitcoin’s evolution.
“Volatility is the price of admission for asymmetric returns, and few assets illustrate this better than Bitcoin. What we are observing with Strategy’s current unrealized loss is not a flaw of the asset; rather, it is a natural phase in its long-term monetization journey,” Thakore explained.
Strategy’s Risky Strategy: Leveraging Debt for Accumulation
Strategy initiated its Bitcoin acquisition in 2020, ahead of the 2021 halving event.
Initially praised as a forward-thinking approach, the strategy drew criticism once the company began issuing convertible debt and stocks to acquire more BTC—essentially leveraging its balance sheet against a notoriously volatile asset.
Critics in the crypto and financial sectors have cautioned that such a model could prove unsustainable during market downturns, with some equating it to a Ponzi-like mechanism.
The strategy thrived during bullish markets when rising Bitcoin prices uplifted investor sentiment and facilitated additional capital raising.
However, as Bitcoin retraced from its peaks, Strategy has found itself increasingly vulnerable.
Throughout the bear market of 2022–23, the company held its ground despite stock price fluctuations and external pressures.
Yet, the stakes are even higher now.
Strategy has significantly increased its BTC holdings since then. If the asset continues to decline, even marginal decreases could dramatically affect its treasury and market valuation.
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