Report Reveals MicroStrategy’s Critical Decision: Will They Sell or Hold Their Bitcoin?

A recent report by brokerage firm Bernstein sheds light on MicroStrategy’s potential need to liquidate its bitcoin (BTC) holdings, but only under significant price corrections, given its debt obligations set to expire in mid-2025.

Delving into the intricate balance between its digital asset wealth and impending debt obligations, the report reveals when MicroStrategy might be compelled to make a critical decision. Let’s break it down, shall we?

MicroStrategy’s Balance Sheet

According to the report, if bitcoin prices surge, it would bolster MicroStrategy’s balance sheet, elevate its stock price, and make debt repayment more manageable, thereby eliminating the necessity of selling its cryptocurrency assets. Moreover, a robust bitcoin price and increased stock value would empower the company to secure fresh debt or equity and redeem existing convertible notes.

On the flip side, if Bitcoin experiences a substantial decline, reaching exceptionally low prices, and the value of MicroStrategy’s cryptocurrency assets fails to cover its debt and specific covenants beyond June 2025, the report suggests that the company’s corporate structure might face pressure from debt agreements, possibly accelerating debt repayment to 2025/2026.

Read More: Bitcoin Halving 2024: Here’s How MicroStrategy Could Hit the Jackpot Soon

The analysts at Bernstein caution that utilizing debt as a strategy in the volatile Bitcoin market always carries risks, with the potential for one-off forced liquidations.

An Impressive Stash, But Will It Yield Results?

Presently, MicroStrategy holds approximately 152,000 bitcoin, procured at an average price of around $29,600, with a total cost basis of about $4.5 billion. These cryptocurrency assets represent approximately 0.78% of the total bitcoin supply and account for roughly 20% of the daily average BTC trading volume.

According to a report from investment bank Berenberg, MicroStrategy’s ability to refinance its debt maturities would significantly improve if the company’s share price and the value of its bitcoin holdings witness substantial increases.