Strategy’s BTC Holdings Drop 55% as Corporate Value Declines
Bitcoin's recent price drops have affected corporate holder MicroStrategy (MSTR), which has seen a 55% decline from its peak of $543 on November 21, trading around $250. Leveraged MSTR products like the Defiance Daily Target 2x Long MSTR ETF (MSTX) and T-REX ETF (MSTU) have experienced losses of 90% and 85%, respectively.
Despite the downturn, MicroStrategy remains profitable on its BTC acquisitions since August 2020, achieving a 32% gain with an average cost basis of $66,300 per BTC and an unrealized profit of $10.65 billion at current bitcoin prices of approximately $87,000.
The forced sales question
MicroStrategy's convertible debt analysis reveals potential liquidation risks. Key points include:
- All 499,096 BTC are unencumbered, not pledged as collateral.
- Total outstanding debt is $8.2 billion, backed by BTC valued at $43.4 billion.
- Bitcoin would need to drop to about $16,500 for the company to consider selling holdings.
- Two of the six convertible bonds are below their conversion price, totaling $5 billion.
- Debt maturity extends to 2029, allowing for recovery time.
- If BTC value falls below debt levels upon bond maturity, MicroStrategy may sell BTC to avoid stock dilution.
