A 50% Drop for Strategy: What Does It Mean for Its $43B BTC Reserves?

Strategy’s Bitcoin Holdings Remain Strong Despite 55% Stock Drop—Is a Forced Sale on the Horizon?

With Bitcoin’s recent downturn, a familiar question from past bear markets emerges: Could Michael Saylor’s Strategy (MSTR) be forced to sell part of its massive Bitcoin holdings?

MSTR Stock Faces Steady Decline

While Bitcoin’s price drop has been making headlines, Strategy’s stock (MSTR) has been in a downward trend for months. Currently trading around $250, MSTR has fallen 55% from its November 21 peak of $543.

Investors holding leveraged MSTR-based products have suffered even greater losses:

Defiance Daily Target 2x Long MSTR ETF (MSTX) has crashed 90%
T-REX ETF (MSTU) has declined 85%

Despite this, Strategy’s Bitcoin holdings remain profitable. The company began accumulating BTC in August 2020 at an average cost of $66,300 per BTC. With Bitcoin currently trading at $87,000, Strategy still holds an unrealized profit of $10.65 billion.

Could Strategy Be Forced to Sell Bitcoin?

The possibility of forced BTC sales hinges on Strategy’s debt obligations and whether its Bitcoin holdings remain significantly higher than its liabilities.

Total BTC Holdings: 499,096 BTC (all unencumbered, meaning none are pledged as collateral)
Total Outstanding Debt: $8.2 billion
Current BTC Holdings’ Value: $43.4 billion

For a forced liquidation scenario to arise, Bitcoin’s price would have to plummet to around $16,500, representing an additional 80% decline from current levels.

Debt Structure and Risk Assessment

The largest portion of Strategy’s outstanding debt comes from convertible bonds set to mature in 2029 and 2030, which account for $5 billion of the $8.2 billion total debt.

These bonds are currently trading below their issuance price, but with maturities several years away, there’s time for market recovery.
If Bitcoin’s price were to fall below Strategy’s total debt level by the time these bonds mature, and MSTR stock remained below the conversion price, the company would likely sell BTC to repay the bonds in cash rather than issue new shares and dilute investors.

No Urgent Risk, But Future Uncertainty Remains

At present, Strategy is not at risk of forced Bitcoin liquidations, as its BTC reserves significantly outvalue its debt. However, if Bitcoin experiences a sustained multi-year bear market, the company could eventually face difficult decisions about its Bitcoin strategy.

For now, as long as Bitcoin remains well above $16,500, Strategy’s holdings remain safe—but investors will be watching closely for any signs of distress.