Is MicroStrategy Heading for the Bitcoin Buzzsaw? 🥴💰

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MicroStrategy, or as I like to call it, Strategy, is currently navigating some rather choppy financial waters. Picture this: It once had shares peaking at $475, and now those same shares have taken a nosedive of over 55%. If only their Bitcoin strategy could give a little warning before pulling a stunt like this!

This dramatic drop has left everyone wondering if their grandiose Bitcoin-centric business plan resembles more of a sinking ship than a sturdy vessel. With Bitcoin plunging to the delightful low of $86,000 after a 9% dip, market watchers are practically clutching their pearls while pondering how sustainable this approach truly is.

Strategy: Dire Market Conditions

Now, it turns out that their business model is built on a dream—or maybe a fever dream—of turning into a Bitcoin powerhouse. The company has gobbled up a staggering 499,096 BTC for a total of $43.7 billion, which is a great way to keep your accountant on their toes. To top it off, they recently dusted off their credit score and issued $2 billion in debt, bringing the average cost per Bitcoin to the perfectly reasonable price of $66,350. Nothing like a little fiscal creativity!

Their strategy involves borrowing through 0% convertible notes (so read: the company’s version of a “no money down” deal) and using the profits to chase more Bitcoin, driving those prices higher, which sounds suspiciously like my uncle’s plan to buy lottery tickets to pay off his mortgage. So far, this merry-go-round has been profitable. Still, the current market conditions could cause the whole thing to tip over like a poorly balanced Jenga tower.

Poor MicroStrategy! As MSTR tumbles over -55%, people are inevitably asking, “Will they have to liquidate?”

With a cool $44 BILLION in Bitcoin, tinged with a hint of panic: could a liquidation be on the horizon?

But wait, is liquidation even a possibility? Let’s unpack that mess.

(a thread)

— The Kobeissi Letter (@KobeissiLetter) February 25, 2025

Liquidation Concerns But Not Quite Yet

Research from The Kobeissi Letter suggests that if Bitcoin prices drop below a mere $66,000 and decide to hang around, Strategy might find itself in a pickle. But don’t fret! There seem to be a slew of factors indicating that liquidation is more unlikely than me going for a morning jog.

Strategy is sitting on $8.2 billion in debt, which sounds ominous until you realize it’s against a whopping $43.4 billion worth of Bitcoin. They’ve got a substantial cushion—more luxurious than my grandma’s couch. More importantly, most of their convertible notes don’t mature until 2027, giving Strategy just enough time to avoid sudden death from short-term volatility. In the grand circus of Bitcoin, they’ve managed to stay afloat through several price corrections without selling their precious assets.

Market Conditions: A Different Breed

Currently, the Bitcoin market is decidedly more institutional than it was during the darker days of “crypto winters.” There’s actual support out there now, like frantically raised hands in a desperate classroom. Companies are kicking the tires on Bitcoin reserves, with Rezolve AI making headlines recently by announcing a $1 billion commitment to Bitcoin investment, which is already looking to be a heavy spend with $100 million already funneled in. Countries are in on the game too, and lo! The more interest this garners, the more the masses line up at the crypto buffet.

Mind you, despite BitMEX co-founder Arthur Hayes predicting further declines like a doomsday prophet with a flair for the dramatic, Bitcoin recently waltzed past all-time highs of $109,000. Who knew volatility could be so entertaining?

Strategy’s history of holding onto its Bitcoin through various cycles, along with structuring debt that doesn’t come due until the next lifetime, protects it from immediate liquidation pressure. But alas, as its stock price spirals down, that flexibility is about as likely as finding a unicorn in your backyard, leaving its controversial model under a constant state of stress.

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2025-02-26 14:44