Disclaimer: The analyst, who wrote this piece, owns shares in Strategy (Mstr).
Bitcoin’s sharp price drop has dominated news headlines this week, but larger Corporate BTC Holdes Strategy (MSTR) has been in a downward trend for more than three months.
The strategy trades around the $ 250 level on Wednesday and is lower by approx. 55%, since he peaked to $ 543 on November 21 Investors in geared Mstr products have suffered even greater losses. Defiance Daily Target 2x Long MSTR ETF (MSTX) has fallen 90%, while T-Rex ETF (MSTU) has fallen 85%.
Despite the fall of Bitcoin, the strategy’s BTC acquisition remains profitable. Since the start of purchases in August 2020, the company has increased by 32% on its stocks, with an average cost basis of $ 66,300 per year. BTC and an unrealized profit of $ 10.65 billion to Bitcoin’s current price of about $ 87,000.
It forced sales questions
A closer look at the strategy’s convertible debt highlights potential “liquidation prices” or forced Bitcoin sales. Remarkably, all of the company’s 499,096 BTC remains effortless, which means that strategy has not pledged any Bitcoin as security. A former convertible note using Bitcoin as security with Silvergate Bank was fully back.
According to Bitcoin overflow of X, the strategy has $ 8.2 billion in the total outstanding debt, supported by 499,096 BTC, currently appreciated at $ 43.4 billion.
The short answer: As long as the value of the strategy Bitcoin exceeds its debt levels, the company does not have to sell any of its BTC holdings. In other words, Bitcoin should fall to approx. $ 16,500 or about an additional 80% from current levels.
When you see a more detailed look, two of the six excellent convertible bonds – 2029 and 2030 edition – are the offer price. However, they are large bonds that account for $ 5 billion out of the total amount of $ 8.2 billion. Even then, the debt matures only in 2029, giving time for recovery.
And in theory, strategy could roll over more paper should it happen. If the value of the company’s Bitcoin were to fall under debt levels at the time the convertible bonds mature and the Mstr Aktie course was below the conversion price (which would be very likely in this scenario), the strategy – to prevent massive dilution in its stock – would probably decide to sell Bitcoin to repay the bonds in cash rather than converter them to equal.
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