MicroStrategy Stock Falls 55%, Is 500,000 BTC At Risk of Selloff?

American business intelligence and software firm Strategy (formerly MicroStrategy) is in the spotlight as its shares have dropped by over 55% from its November high. With the stock market and crypto ecosystem experiencing sustained drawdown, many are concerned that the Bitcoin stash of MicroStrategy is at risk of liquidation.

The MicroStrategy Bitcoin Business Model

According to an X analysis from The Kobeissi Letter, MSTR stock has dropped by 55% from its 60-month high of $473.83. As a company that leverages its shares against Bitcoin bets, the continuous stock valuation presents a major concern.

Currently, Strategy holds approximately 499,096 BTC, which it bought for $43.7 billion. Following the $2 billion debt offering raised earlier this month, MicroStrategy now boasts an average cost per BTC of $66,350. With the price of Bitcoin currently pegged at $89,445, a drop below the average cost might force the firm to sell off its shares to offset the shortfall in its debt position.

However, Kobeissi pointed out that the likelihood of this event was low. The analysis outlined the business model of Strategy, which involves borrowing money through 0% convertible notes, buying BTC and driving the price higher, selling new shares, and buying more BTC.

With BTC price dropping as high as low as $86,008.23, after an 8% value drop, the company’s ability to bet against its own shares is now limited.

Is MSTR Bitcoin Holding at Risk of Liquidation?

According to The Kobeissi Letter, for MicroStrategy to liquidate its BTC holdings, the asset’s price will have to fall below $66000. 

Beyond this, it was noted that it would have to stay below it. As the analysis detailed, Saylor has kept up with his Bitcoin acquisition strategy since August 2020. Within this period, the market has witnessed a series of Bitcoin price crashes like the one recorded this week.

However, throughout this time, MicroStrategy has not sold its BTC but has stayed sustainable. 

Notably, the firm holds $8.2 billion in debt for $43.4 billion worth of the cryptocurrency. The company has strategically bought itself enough time, as most of its convertible notes are due for maturity in 2027. 

The logic is that before this time, the coin would have recovered from any ongoing price drawdown. This largely insulates the firm from short-term risks.

BTC Price Unlike Previous Crypto Winter

While popular analysts like BitMEX co-founder Arthur Hayes have predicted more price crashes, the outlook for BTC is promising.

Unlike previous crypto winters, the market is now driven by institutional investors adopting Bitcoin reserve strategies. As reported earlier, Rezolve Ai unveiled a $1 billion BTC plan, with a first commitment of $100 million to the coin.

Nation states also plot similar strategies, giving BTC a rich demand base. On this premise, there are projections that Bitcoin’s price may hit multiple all-time highs beyond its current $109,000 mark.