MicIs MicroStrategy’s Bitcoin Bet in Trouble? Breaking Down Its 50% Decline
MicroStrategy (MSTR) has been a major player in the Bitcoin (BTC) ecosystem, famously going all-in on the asset under Michael Saylor’s leadership. However, the company’s stock is now down over 50% from its all-time high in November 2024—and with Bitcoin’s recent price drop, questions are swirling about the fate of its massive 499,096 BTC holdings. Should investors be worried?
MicroStrategy’s Price Drop: What’s Happening?
MSTR has been in a steady decline, currently trading around $250, far from its peak of $543 just a few months ago. Meanwhile, leveraged products tied to MSTR, like MSTX and MSTU, have suffered even worse losses—plunging 90% and 85%, respectively.
Despite these declines, MicroStrategy’s Bitcoin holdings remain profitable. Since the company started acquiring BTC in August 2020, its average purchase price per Bitcoin is around $66,300, meaning it still holds an unrealized profit of over $10.65 billion at today’s BTC price of $87,000.
The Big Question: Will MicroStrategy Be Forced to Sell BTC?
Given MicroStrategy’s aggressive debt-financed Bitcoin strategy, some investors worry about forced liquidations. However, the company’s BTC holdings remain unencumbered—meaning none of it has been pledged as collateral. Previously, a loan with Silvergate Bank that used Bitcoin as collateral was fully repaid.
MicroStrategy currently has $8.2 billion in total outstanding debt, backed by its $43.4 billion worth of Bitcoin. Analysts estimate that Bitcoin would need to crash to $16,500—an additional 80% decline—before MicroStrategy would be in real trouble.
Convertible Debt and Potential Risks
Looking deeper, two of MicroStrategy’s convertible bonds—maturing in 2029 and 2030—are trading below their original offering price. These bonds make up the bulk of its $8.2 billion debt, but since they don’t mature for several years, MicroStrategy has time to recover.
If Bitcoin’s price were to fall below the company’s debt levels when these bonds mature, MicroStrategy would face a tough choice: either sell Bitcoin to cover debt or convert debt into stock, which could dilute shareholder value.
Bottom Line: Is MicroStrategy’s Bitcoin Strategy Sustainable?
Right now, MicroStrategy is not at risk of forced Bitcoin sales, but its fate is deeply tied to Bitcoin’s price movements. If BTC continues to slide, pressure will mount. On the flip side, if Bitcoin recovers, MSTR could see a resurgence.
For investors, the key takeaway is that MicroStrategy is playing a long game—but whether that bet pays off depends entirely on Bitcoin’s trajectory. The real question is: How low can Bitcoin go before MicroStrategy feels the heat?
MicroStrategy’s Bitcoin Gamble: Is the $43B Stack at Risk?
MicroStrategy (MSTR) has been synonymous with Bitcoin ever since its executive chairman, Michael Saylor, made an audacious bet on the cryptocurrency. However, as Bitcoin’s price experiences a pullback, MicroStrategy’s stock is feeling the heat, now down over 50% from its November highs. With nearly 500,000 BTC on its balance sheet, worth an estimated $43 billion, the question arises: Is there a breaking point where MicroStrategy might be forced to liquidate part of its holdings?
A Painful Decline for MSTR Investors
Since hitting an all-time high of $543 on November 21, 2024, MicroStrategy’s stock has slid dramatically to around $250. Meanwhile, leveraged investment products tied to MSTR have been crushed—Defiance Daily Target 2x Long MSTR ETF (MSTX) and T-REX ETF (MSTU) have fallen by a staggering 90% and 85%, respectively.
Despite the turbulence, MicroStrategy’s Bitcoin holdings remain profitable. The company started acquiring BTC in August 2020, with an average cost basis of $66,300 per Bitcoin. Even at the current BTC price of $87,000, the firm still sits on an unrealized profit of about $10.65 billion.
Does MicroStrategy Face Forced Liquidation?
A key concern is whether MicroStrategy would be forced to sell Bitcoin to cover its debts. As of now, the company holds $8.2 billion in total outstanding debt, backed by its BTC holdings. However, none of its 499,096 BTC are pledged as collateral.
For MicroStrategy to reach a crisis point, Bitcoin’s price would have to plummet to around $16,500—a drastic 80% drop from current levels. Even then, the company has options. Most of its convertible bonds don’t mature until 2029 and 2030, giving it ample time for market conditions to recover.
The Bigger Picture
While MicroStrategy’s stock struggles, its long-term Bitcoin strategy remains intact. As long as BTC stays above critical levels, there’s no immediate risk of forced liquidation. However, the stock’s volatility means investors need to brace for continued fluctuations.
With Bitcoin’s future looking promising in the long run, could MicroStrategy’s aggressive strategy eventually pay off? Or will market pressure force the company to rethink its approach? Only time will tell.
Disclaimer: The information provided in this article is for informational and educational purposes only and should not be considered financial or investment advice. Cryptocurrency investments are highly volatile and risky. Always conduct your own research and consult with a professional financial advisor before making any investment decisions. The author does not hold any position in MicroStrategy (MSTR) or Bitcoin at the time of writing.