MicroStrategy’s Billion-Dollar Bitcoin Bet: Is a Forced Sale Inevitable?

BitMEX Research warns that MicroStrategy’s strategy of issuing bonds to fund Bitcoin purchases carries significant risks.

The firm has accumulated a substantial Bitcoin reserve by issuing debt, a tactic that may expose it to potential financial strain.

While BitMEX suggests a forced liquidation of the company’s Bitcoin holdings is unlikely, it acknowledges the high volatility of Bitcoin and the risks associated with its price fluctuations. MicroStrategy currently has $4.25 billion in outstanding bonds, with two bonds already repaid. If Bitcoin’s value drops sharply, particularly during bond maturity periods, the company could face a scenario where its Bitcoin holdings are insufficient to cover its debt.

Although such a drastic decline in Bitcoin’s price to levels around $15,000 is unlikely to immediately force a sale of Bitcoin, analysts may need to reconsider if the company cannot raise additional funds or if the situation worsens. Given the maturity dates for the bonds extend from 2027 to 2031, a forced liquidation remains improbable, but a significant drop in Bitcoin’s value could create pressure.

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More realistically, BitMEX predicts that if MicroStrategy’s stock premium evaporates, shareholders may push the company to sell Bitcoin to meet bond obligations. This situation could arise if the stock moves from a premium to a discount, a shift that may trigger the sale of its Bitcoin holdings to maintain liquidity. While the company can currently avoid such action due to the stock’s high premium, that “infinite money glitch” won’t last indefinitely.

Kosta Gushterov

Kosta has been working in the crypto industry for over 4 years. He strives to present different perspectives on a given topic and enjoys the sector for its transparency and dynamism. In his work, he focuses on balanced coverage of events and developments in the crypto space, providing information to his readers from a neutral perspective.