MicroStrategy’s Bitcoin Blunder: A Tale of Woe and Wobbly Wallets

by

One cannot help but feel a pang of sympathy for the American business intelligence and software firm Strategy (formerly known as MicroStrategy, but who’s counting?). The poor chap has found itself in a bit of a pickle, with its shares plummeting by a rather alarming 55% from its November high. Oh, what a to-do! The stock market and crypto ecosystem, both in a bit of a funk, have left many a worried investor wondering if MicroStrategy’s vast Bitcoin stash is teetering on the brink of a great selloff. 🤔

The MicroStrategy Bitcoin Business Model

According to an X analysis from The Kobeissi Letter, MSTR stock has taken a nosedive, dropping by 55% from its 60-month high of $473.83. The company, ever the gambler, has been leveraging its shares against Bitcoin bets, a strategy that now seems as precarious as a tightrope walker in a hurricane. 🌪️

At present, Strategy holds a rather impressive 499,096 BTC, which it acquired for the princely sum of $43.7 billion. After raising a cool $2 billion in debt earlier this month, MicroStrategy can now boast an average cost per BTC of $66,350. With Bitcoin currently trading at a lofty $89,445, one might think the firm is sitting pretty. However, should the price dip below the average cost, the company might find itself in the unenviable position of having to sell off its shares to cover the shortfall in its debt position. Oh, the humanity! 😱

However, The Kobeissi Letter, ever the voice of reason, suggests that the likelihood of such a catastrophic event is rather low. The analysis delves into the intricacies of Strategy’s business model, which involves borrowing money through 0% convertible notes, buying BTC, driving the price higher, selling new shares, and buying more BTC. It’s a bit like a financial merry-go-round, but with more Bitcoin and less nausea. 🎡

With BTC taking an 8% tumble to a low of $86,008.23, the company’s ability to keep this financial carousel spinning is now somewhat limited. But one must admire their persistence! 🏆

Is MSTR Bitcoin Holding at Risk of Liquidation?

According to The Kobeissi Letter, for MicroStrategy to liquidate its BTC holdings, the price of the digital wonder would have to fall below $66,000. And not just a fleeting dip, mind you, but a sustained drop. 📉

It’s worth noting that since August 2020, MicroStrategy’s fearless leader, Michael Saylor, has been on a Bitcoin acquisition spree, come rain or shine. Despite the market’s occasional hiccups, the company has steadfastly held onto its BTC, demonstrating a level of fortitude that would make a Roman centurion blush. 🛡️

Currently, the firm is saddled with $8.2 billion in debt for $43.4 billion worth of the cryptocurrency. But fear not, for most of its convertible notes are due in 2027, giving the company ample time to weather any short-term storms. The logic is simple: by the time the notes come due, Bitcoin will have recovered from any current price drawdown. It’s a bit like waiting out a thunderstorm in a well-built bunker. 🏦

BTC Price Unlike Previous Crypto Winter

While some doom-and-gloomers, like BitMEX co-founder Arthur Hayes, predict more price crashes, the outlook for BTC is surprisingly rosy. Unlike previous crypto winters, the market is now buoyed by institutional investors adopting Bitcoin reserve strategies. For instance, Rezolve Ai recently unveiled a $1 billion BTC plan, with an initial commitment of $100 million to the coin. 🚀

Nation states are also getting in on the act, further bolstering the demand for BTC. On this promising premise, there are projections that Bitcoin’s price may hit multiple all-time highs, potentially surpassing its current $109,000 mark. It’s enough to make one feel positively bullish! 🐂

Read More

2025-02-26 08:10