MicroStrategy Faces Its Biggest Test Amid Bitcoin Market Volatility, Forced to Sell Their BTC Holding for a Loss?
2025-02-26
Michael Saylor’s Strategy, formerly known as MicroStrategy, is currently facing one of its most significant financial challenges.
Since the beginning of the year, the company’s stock has plummeted by over 55%, per Google Finance data, leading many to question whether the firm will be forced to liquidate its substantial Bitcoin holdings.
The Bitcoin Holdings and Financial Risk
Source: @KobeissiLetter on X
Strategy currently holds approximately 499,096 BTC, valued at around $44 billion. However, with Bitcoin trading well below the company’s average purchase price of $66,350 per BTC, Strategy is staring at billions in unrealized losses.
If Bitcoin’s price continues to decline, the company’s financial structure could be in jeopardy.
Strategy’s business model is centered around Bitcoin accumulation, funded through a combination of debt and equity raises. The firm has amassed $8.2 billion in debt against its $44 billion Bitcoin holdings, reflecting a leverage ratio of about 19%.
A substantial portion of this debt consists of convertible notes, which allow creditors to convert loans into $MSTR shares if the stock trades above a predetermined price.
While Michael Saylor has downplayed the risks of forced liquidation, stating, “Even if Bitcoin went to $1, we would not be liquidated. We would just buy all of the Bitcoin,” financial analysts have identified potential risk factors.
According to EpochVC, a forced liquidation could occur under one critical condition—a “fundamental change” in the company’s structure, such as a stockholder vote or corporate bankruptcy. In either scenario, Strategy could be compelled to sell off its Bitcoin reserves.
Source: @KobeissiLetter on X
The 2027 Debt Maturity and Long-Term Viability
Source: @KobeissiLetter on X
Despite Saylor’s confidence, one of the most pressing concerns lies in the coming years. Strategy’s biggest financial hurdle is expected in 2027 and beyond when the first batch of its convertible notes reaches maturity.
Analysts from Goldman Sachs have warned that if Bitcoin prices crash by another 50% and remain consolidated at lower levels, creditors may refuse to roll over debt, forcing Strategy into a liquidity crisis.
Michael Saylor currently holds 46.8% of the voting power, giving him significant control over company decisions. However, shareholders are now at a crossroads—should they continue betting on Saylor’s vision, or cut their losses, potentially pushing the company into a financial corner?
Read Also: BTC News: Microstrategy Adds $46 Billion to BTC Holdings, Proving Its Commitment
The Recent Bitcoin Market Sell-Off and Strategy’s Response
The broader cryptocurrency market has been experiencing turbulence, with Bitcoin dropping as much as 5.8% from a high of $96,500 to below $91,000 due to macroeconomic uncertainties and geopolitical tensions.
Factors contributing to the risk-off sentiment include labor market concerns driven by Elon Musk’s Department of Government Efficiency, uncertainties in the AI sector as investors anticipate Nvidia’s earnings report, and escalating trade war tensions under President Donald Trump’s proposed tariffs on Canada and Mexico.
Despite this downturn, Michael Saylor remains bullish. In a recent post on , he referred to the sell-off as an opportunity, declaring, “Bitcoin on sale.”
Historically, similar statements have preceded additional Bitcoin acquisitions by Strategy, as the company has aggressively pursued its Bitcoin treasury strategy since 2020.
Indeed, on February 23, Saylor shared a "Saylor Tracker" chart showcasing the company’s Bitcoin purchases. Shortly after, on February 24, Strategy announced a fresh $2 billion Bitcoin purchase, bringing its holdings to just under 500,000 BTC.
This recent buy was funded through a $2 billion senior convertible note offering, with an option for investors to purchase an additional $300 million in notes before February 27. Should investors take up this offer, another Bitcoin purchase by Strategy is likely on the horizon.
Is Strategy’s Bitcoin-First Approach Sustainable?
The sustainability of Strategy’s aggressive Bitcoin accumulation strategy remains a hot topic. While its holdings currently show paper gains of over 36%, and its stock price has surged more than 300% in the past year, analysts remain divided on the long-term implications.
Some, like James Van Straten, argue that Strategy’s approach does not maximize shareholder value. He suggests that instead of making frequent, large purchases, the company could optimize its strategy by buying at key technical levels, such as when Bitcoin retests short-term holder realized prices or key exponential moving averages.
Despite the skepticism, Strategy’s method of leveraging convertible debt to fund Bitcoin acquisitions has so far been effective. However, the question remains: will investors continue to support this strategy, especially if Bitcoin enters another prolonged bear market?
Read Also: Behind the Crowd Trend Hundreds of Companies Plan to Buy BTC in 2025
The Possibility of Forced Liquidation
Source: @KobeissiLetter on X
The ongoing debate about whether Strategy could be forced to liquidate its Bitcoin reserves is not new. The company has weathered multiple bear markets, including the 2022 downturn when Bitcoin dropped from approximately $70,000 to $15,000.
Yet, this time could be different due to the scale of its Bitcoin holdings and the complexity of its financial structure.
Key Risks to Consider
1. Debt Obligations: Strategy holds approximately $8.2 billion in debt against its Bitcoin reserves. Most of this debt is in convertible notes, which may become problematic if Bitcoin prices drop significantly and remain low for an extended period.
2. Convertible Note Maturity: A major risk emerges in 2027 when the first batch of convertible notes matures. If Bitcoin prices remain depressed, creditors may refuse to roll over the debt, creating a liquidity crisis.
3. Shareholder Vote or Bankruptcy: According to EpochVC, a forced liquidation scenario would likely require either a stockholder vote or corporate bankruptcy. However, given Saylor’s 46.8% voting power, this remains unlikely unless investors lose faith in his vision.
4. Market Sentiment and Capital Raises: Strategy’s business model relies on continuous capital raises. If investors lose confidence during a prolonged bear market, securing new funding could become increasingly difficult.
Source: @KobeissiLetter on X
Conclusion: A High-Stakes Gamble
Michael Saylor’s Strategy is now experiencing its first real test as a Bitcoin-first company. With Bitcoin trading below the firm’s average purchase price, the pressure is mounting.
While Saylor remains steadfast in his belief that Bitcoin is the future, the coming years—particularly post-2027—will determine whether Strategy’s aggressive approach is sustainable or if it will be forced into a financial restructuring.
For now, the crypto community and investors are watching closely. As Saylor puts it, “Bitcoin is on sale.” But whether this “sale” turns into a financial windfall or a costly gamble remains to be seen.
Read more about Bitcoin (BTC):
BTC to USD: Convert Bitcoin to US Dollar
FAQ
1. What is MicroStrategy's primary business strategy?
A: MicroStrategy's core strategy is accumulating and holding Bitcoin. They've amassed a substantial amount of BTC, funded through a combination of debt and equity raises.
2. How much Bitcoin does MicroStrategy currently hold?
A: MicroStrategy holds approximately 499,096 BTC.
3. What is MicroStrategy's average purchase price for Bitcoin?
A: Their average purchase price is $66,350 per Bitcoin.
4. Why is MicroStrategy facing financial challenges?
A: Bitcoin's price is currently trading below MicroStrategy's average purchase price, resulting in significant unrealized losses. This, combined with their substantial debt, is putting pressure on the company's financial position.
5. How much debt does MicroStrategy have?
A: MicroStrategy has approximately $8.2 billion in debt, largely secured by their Bitcoin holdings.
6. What are convertible notes, and how do they relate to MicroStrategy's situation?
A: Convertible notes are a type of debt that can be converted into company stock under certain conditions (usually if the stock price rises above a certain level). MicroStrategy has a significant portion of its debt in convertible notes, which could become problematic if Bitcoin's price remains low, making conversion less attractive for creditors.
7. What is the significance of 2027 for MicroStrategy?
A: A significant portion of MicroStrategy's convertible notes mature in 2027. If Bitcoin's price remains low, the company may struggle to refinance this debt, potentially leading to a liquidity crisis.
8. Could MicroStrategy be forced to sell its Bitcoin holdings?
A: While Michael Saylor insists they won't be forced to sell, analysts suggest a "fundamental change" in the company's structure, such as a stockholder vote or bankruptcy, could trigger a forced liquidation. Saylor's majority voting power makes this less likely, but not impossible.
Disclaimer: The content of this article does not constitute financial or investment advice.
