Rumors have been circulating that Strategy will be forced to liquidate its Bitcoin reserves if the price keeps dropping. The specific fears have been overstated, but the fundamental idea might be essentially true.
In any event, both Bitcoin and the firm’s stock price rose substantially after Trump announced a tariff pause. The immediate danger of a selloff has seemingly passed, but these factors may come into play in the future.
Will Strategy Need to Sell Its Bitcoin?
Since Strategy (formerly MicroStrategy) started buying Bitcoin, it’s become one of the world’s largest holders and a major pillar of market confidence.
While this has financially strengthened the company, it also presents certain challenges. Being one of the largest holders, if Michael Saylor’s firm chooses to sell a portion of its holdings, it could impact BTC’s market performance.
Rumors have been circulating that such an event might be inevitable, based on a recent filing. In the SEC filings, the firm writes a disclaimer that without access to favorable equity or debt financing, it could be required to liquidate BTC at a loss.
While the statement exists, it’s not new or extraordinary; it’s a routine inclusion found in MicroStrategy’s previous 10-Q reports from Q1 2024 and prior years.
BeInCrypto reported on Strategy’s Form 8-K when it came out earlier this week, analyzing its implications. The form claimed that Strategy did not buy any Bitcoin last week and has over $5.91 billion in unrealized losses.
“We may be required to take actions to pay expenses, such as selling bitcoin or using proceeds from equity or debt financings, some of which could cause significant variation in operating results in any quarter,” Strategy’s SEC filing claimed.
During the recent market chaos, these unrealized losses caused a lot of distress in the crypto community. However, that doesn’t mean that Strategy will have to dump its Bitcoin soon. In any event, its stock rallied today because of Trump’s tariff pause.
A Few Credible Selloff Scenarios
Although these concerns lack nuance, that doesn’t mean they’re totally unfounded. Michael Saylor claimed that Strategy can pay off its debts even if Bitcoin crashes, but some community members think these claims are either incorrect or deliberate lies.
His stated plan would involve massively diluting stock when he has already sold huge volumes.
In fact, several scenarios could force Strategy to sell its Bitcoin. If its price were to fall significantly and stay low, Strategy’s ability to meet debt obligations without tapping its BTC treasury could become strained.
The firm’s low revenue from its non-BTC business ventures would further exacerbate this problem.
Additionally, Strategy has used Bitcoin as collateral for loans on several occasions. If BTC drops below collateral thresholds, margin calls could force partial liquidation. However, such scenarios would be outlined in specific loan agreements, not general filings.
Above all else, the appearance of forced selling can seriously impact market sentiment, which is why these rumors are so serious.
Strategy’s stock price and Bitcoin are both riding high right now, and selloff fears seem less imminent. Yet, the fundamental macroeconomic situation remains unchanged. If Bitcoin falls again, MSTR’s debt position in the market will likely be impacted.
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