"Even selling a kidney to keep Bitcoin," Strategy's long position faces liquidation concerns

Author: Nancy, PANews

"If necessary, sell a kidney, but keep the Bitcoin." This seemingly humorous remark from Michael Saylor, founder of Strategy (formerly MicroStrategy), reflects a strong belief in the long-term value of Bitcoin.

Recently, Bitcoin has led a broad decline in the cryptocurrency market, and the pessimistic liquidity outlook has intensified market sell-off sentiments. In this market environment, investors cannot help but worry that MicroStrategy, a veteran in Bitcoin leverage, might face a "car crash."

Bullish bets face a cold wave, what is the risk of liquidation?

The Bitcoin super bull, Strategy, is facing dual pressures from profit pullbacks and declining stock prices.

According to MSTR-tracker data, as of February 28, Strategy holds a total of 499,096 Bitcoins, with a total purchase cost of nearly $33.12 billion and an average purchase price of about $66,357. The current total value of Bitcoin holdings is $39.57 billion. Compared to a few months ago, when Strategy's Bitcoin holdings had a peak unrealized gain of nearly $20 billion, it has now dropped to $6.45 billion.

As unrealized gains have significantly retreated, Strategy's stock price has also continued to decline. Google Finance shows that as of February 28, Strategy's stock price has fallen more than 39.4% from this year's high of $396.5. The market has also raised concerns that this "Bitcoin treasury" company may be forced to liquidate its Bitcoin holdings. As crypto analyst Miles Deutscher pointed out, the premium rate of Strategy's market value relative to its Bitcoin assets has dropped from 3.4 times in November last year to the current 1.6 times. The lower this value, the harder it becomes for Michael Saylor to raise more funds to purchase Bitcoin, which means that the pace of buying Bitcoin may slow down.

However, analysis firm The Kobeissi Letter believes that this situation is "almost impossible." The reason lies in the structural design of Strategy's convertible notes, the company's previous ability to raise $1.8 billion in equity during Bitcoin's downturn, and Michael Saylor's 46.8% voting power, which together form a strong safeguard against forced liquidation. Even if Bitcoin's price drops by 50% to $33,000, Strategy's assets will still exceed its debts by more than 100%.

Currently, Strategy has a total of $9.26 billion in unsecured debt. According to Strategy's official website, the company has six outstanding convertible bonds, most of which were issued at very low interest rates, with maturity dates mostly after 2028, the latest being due in June 2032. Even though the two largest bonds total $5 billion, accounting for more than half of the total debt, and their market prices are below the issue price, raising market concerns about these debts, they will not mature until after the end of 2029, giving Strategy ample time to respond and adjust. Moreover, the Bitcoins held by Strategy are not directly pledged as collateral for loans; its funding mainly comes from external investors. To some extent, the structure of Strategy's convertible bonds and its financing ability reduce the likelihood of its Bitcoins being forcibly pledged or liquidated.

In addition, from the perspective of Strategy's stock holdings, it not only demonstrates the high recognition and confidence of large institutional investors in Strategy but also brings stronger market credibility and capital support. Fintel data shows that Strategy has 1,403 institutional owners and shareholders, including Susquehanna International Group, Vanguard Group, IMC-Chicago, Citadel Advisors, Jane Street Group, Capital International, and BlackRock.

Continuing to be bullish in a down market, targeting $10 billion in profits by 2025

Despite the cold wave in the crypto market, Michael Saylor remains firmly bullish, even continuing to increase his positions during Bitcoin's downturn.

In a recent public appearance, Michael Saylor reiterated that Bitcoin is becoming the "world reserve capital network," superior to real estate and stocks, and is a digital asset worth holding long-term. He predicts that the current $2 trillion market cap of the Bitcoin network will grow to $20 trillion in the next 4 to 8 years, outpacing the growth of other global assets, and states that "volatility is a gift for the loyal." Saylor even mentioned that after his passing, he would donate his personal shares to public charities supporting Bitcoin, highlighting his deep belief in Bitcoin.

"From selling software to selling Bitcoin, Saylor's orange empire has taken shape." To emphasize its crypto-centric business, Strategy recently underwent a rebranding. In early February, Strategy announced that as the world's first and largest Bitcoin financial company, this brand simplification is a natural evolution reflecting the company's focus and broad appeal. The new logo includes a stylized "B," representing the company's Bitcoin strategy and its unique position as a Bitcoin financial company. The brand's primary color is now orange, symbolizing energy, wisdom, and Bitcoin. Additionally, Strategy launched a new software website at strategysoftware.com and a merchandise website at store.strategy.com.

In advancing the crypto industry, Strategy has not only launched the Bitcoin Hub co-working space to attract innovators to promote the development of the Bitcoin ecosystem but also met with the SEC's crypto working group to propose regulatory framework suggestions for digital assets, attempting to establish clear boundaries for the market. Industry insiders believe that Saylor is not only hoarding Bitcoin but also shaping industry rules, showcasing the posture of a long-term player.

It is worth mentioning that Strategy announced it would adopt the latest FASB accounting standards in the first quarter of 2025. If Bitcoin closes above $96,337 in the first quarter, Strategy's positive profitability is expected to meet the inclusion criteria for the S&P 500 index. Once achieved, Strategy will further enhance its market influence. In a previous earnings report, Strategy announced its target for Bitcoin profits in 2025 is set at $10 billion, with an annualized return of 15%.