MicroStrategy, the largest corporate holder of Bitcoin, is under growing scrutiny as market analysts warn of a potential Bitcoin price drop.
With Bitcoin trading near key levels, concerns are mounting over whether the company’s aggressive accumulation strategy will withstand a major downturn.
Impact of Bitcoin Drop
MicroStrategy has gradually increased the size of its Bitcoin position by buying the crypto asset at different prices.
The company’s average purchase cost is around $68,000 per BTC. The average cost of purchase for Bitcoin ETFs has now fallen to the low $70,000s.
Markert analysts, including Arthur Hayes, believe that Bitcoin can be dragged down by as much as 30% with the price per coin possibly hovering around the low $70,000s.
If this happens, the company’s Bitcoin holdings would be just above the breakeven level. That means MicroStrategy’s approach will be tested. Jim Bianco of Bianco Research said,
“At this point, on an average cost basis, Saylor has not made any profit.”
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He said that in case Bitcoin falls further, the only way MicroStrategy and Bitcoin ETFs could report positive results is if more Bitcoin is bought.
The Bitcoin Strategy and Market Responses
Michael Saylor remains one of Bitcoin’s most vocal supporters, positioning his company as a leader in corporate Bitcoin adoption.
The firm now owns more than 471,000 BTCs purchased with corporate funds and borrowed money.
Although this has been a profitable strategy during the bull runs in the price of Bitcoin, a sharp drop in prices could create doubts about the company’s financial strength.
The broader market is also paying keen attention to the Bitcoin ETFs that have attracted billions in assets since their launch.
In the event of a deep correction in Bitcoin, ETF outflows may rise thereby compounding selling pressure and market volatility.
Bianco Research likened MicroStrategy’s predicament to Julian Robertson’s Tiger Fund, another hedge fund that struggled when markets turned against it.
For this reason, the managers of the fund could not seize new trends. This led to forced adjustments and losses to the investors.
Likewise, there may be more pressure from shareholders and regulators on MicroStrategy if Bitcoin does not hold higher prices.
Long term Bitcoin supporters see this as a normal market crash. Short term traders may panic and adjust their risk assessment of the company.
MicroStrategy Expands Bitcoin Holdings with $1.1 Billion Purchase
However, MicroStrategy is not backing down from Bitcoin even as the market raises eyebrows.
The firm has just purchased 10,107 BTC for $1.1 billion. This raises the total number of BTC held by the company to 471,107 BTC.
In order to add to its Bitcoin holdings, MicroStrategy has announced a planned preferred stock offering of 2.5 million shares of Series A Perpetual Strike Preferred Stock.
All the proceeds from this offering will be utilized to buy more Bitcoin and for the running of the corporate activities of the company in order to support investment in the digital currency regardless of market volatilities.
Source: https://www.thecoinrepublic.com/2025/01/30/microstrategys-bitcoin-strategy-under-pressure-saylor-hasnt-profited/