Source: Talk Li Talk Outside
After several consecutive days of plummeting, today (February 28) we finally saw BTC with a 7 in front of it. I wonder how the partners are holding up after experiencing another Black Friday crash?
Let's briefly review the recent Black Fridays:
On Friday, January 17, the TRUMP token was officially launched, starting to drain market liquidity.
On Friday, January 24, the global AI stock crash triggered by Deepseek also led to a significant correction in the crypto market.
On Friday, January 31, Trump's tariff policy further shook the financial market, and in the following days, ETH entered a massive liquidation crash.
On Friday, February 14, the release of the LIBRA token by the President of Argentina further triggered a liquidity crisis in the crypto.
On Friday, February 21, a new black swan event occurred, as Bybit was hacked and $1.5 billion in assets were stolen.
On Friday, February 28, Trump's tariff policy escalated, causing BTC to fall below $80,000, and Altcoins to be further bloodbathed.
Yesterday, I saw partners in the group discussing Strategy (MicroStrategy), and coincidentally this morning I also saw a message from a partner asking about Strategy-related issues. Whenever the market crashes, there always seem to be some partners who are particularly concerned about whether large institutions will be liquidated.
So let's continue to discuss Strategy.
In fact, we have already introduced and sorted out Strategy in some previous articles, such as the articles on February 10 this year and November 28, 2024. Interested partners can search and review the corresponding historical articles.
As of the time of writing, Strategy holds a total of 499,096 BTCs, with an average purchase cost of $66,380.42 per BTC, making it the institution with the largest BTC holdings. As shown in the figure below.
Strategy has been buying BTC since September 2020, and the total value of its BTC holdings is $40.78 billion, with a total investment cost of $33.11 billion and a P/L of $7.648 billion, with an overall return of 23.08%. However, due to the recent price fluctuations of BTC, if we only look at their BTC holdings in the past few months, they are also in a floating loss, as shown in the figure below.
Then, let's also compare the stock price trend of MSTR. In fact, the stock trend of Strategy is basically linked to the sentiment of the crypto market. For example, since the beginning of February, MSTR has also shown a relatively obvious downward trend, with a drop of 31%, as shown in the figure below.
Seeing this, some partners may be curious: since the price of BTC is still in a continuous crash, and the price of MSTR is also in a continuous crash, if the market continues to develop in this way, will Strategy have problems?
In previous related articles, we have introduced that Strategy's funds for purchasing BTC are mainly raised through debt financing (i.e., convertible bonds), and also include some of the company's idle funds and share issuance. In fact, even from the current perspective, Strategy's approach is a very bold innovation and a genius design.
The core of this BTC strategy is that Strategy itself can obtain the potential benefits of the long-term upward trend of BTC, but at the same time also bear the potential risks of the short-term decline of BTC.
But for Strategy, what they need to do is actually very simple, just continue to buy BTC, and how much they can buy in the future mainly depends on their ability to raise external funds. In other words, Strategy's next move is more determined by external factors, and they themselves are unlikely to waver in their "determination" to continue buying BTC in the long run. We can also understand Strategy's approach as a kind of "smart leverage", and this strategy does not seem to directly lead to a "forced liquidation" situation, in plain language, the direct risk of Strategy's current bankruptcy is not high.
However, there is one situation that may put some pressure on Strategy: if Strategy continues to buy BTC at high prices (through the issuance of convertible bonds), but unfortunately coincides with BTC entering a bear market, and the price of BTC continues to plummet, causing the total value of Strategy's BTC holdings to be lower than the total amount of its convertible bonds, this may further lead to a decline in MSTR, making it difficult for Strategy to continue to raise external funds through the issuance of convertible bonds, which will put some pressure on Strategy.
In summary, the pressure on Strategy requires the simultaneous satisfaction of several conditions: continuing to issue debt to buy BTC at high prices (continuously raising the purchase cost), BTC being in a long-term bear market (lack of liquidity leading to financing difficulties), BTC price starting to plummet, the total value of BTC holdings being lower than its debt scale, and MSTR lacking liquidity and starting to plummet (which will also lead to difficulties in new financing).
If the pressure is strong enough, Strategy theoretically will have several coping strategies:
1. Continue to issue new shares and use the funds to repay.
2. Continue to issue new debt and use the new debt to repay the old debt.
3. Directly sell a portion of BTC and use the funds to repay.
So will this pressure occur? How much pressure will it cause? Let's look at a few more data points:
1. Comparison of MSTR's market capitalization and the value of its BTC holdings
As of the time of writing, MSTR's market capitalization is $605.77, and the total value of Strategy's BTC holdings is $40.78 billion. As long as MSTR's market capitalization is greater than the total value of its BTC holdings, it means that there is a market value premium (the current premium is 48.55%), which means that Strategy can still buy more BTC by diluting MSTR's equity, and at the same time further increase the "BTC content" per share of MSTR.
2. Comparison of Strategy's debt scale and the value of its BTC holdings
Strategy's current debt scale is about $8.2 billion, and these debts are supported by $40.7 billion worth of BTC as reserves, which means their current leverage ratio is only about 20%, which still looks quite healthy from the current perspective.
Moreover, these debts are mainly the convertible bond notes mentioned in the previous article, and most of the notes will not mature until after 2027, so at the moment, it seems that Strategy does not have much repayment pressure.
3. Michael Saylor, the founder of Strategy
Saylor has now become a very staunch supporter of BTC, and he has previously made some seemingly exaggerated statements on social media, such as:
"Even if BTC falls to $1, Strategy will not be liquidated, on the contrary, we will buy up all the bitcoins."
"If necessary, I suggest selling a kidney, but keeping the bitcoin." (Meaning that he would not sell the bitcoin even if he had to sell a kidney haha)
He even hinted in an interview that after his death, he would destroy his own bitcoin private keys to ensure that the bitcoins he holds would never be sold.
Regardless of whether the statements of this capitalist are true or false, he is indeed buying, buying, and buying bitcoins with real money, and is the most typical representative and model figure of bitcoin dollar-cost averaging.
Of course, Saylor's statements are also backed by his own strength, as he currently holds 46.8% of the voting rights in Strategy (holding 10% of the company's shares), which means he currently has almost complete control over MSTR's decision-making power. In addition, it is said that he personally holds about $1.9 billion worth of bitcoin.
In summary, even though bitcoin has recently faced consecutive price crashes, it does not seem to have caused too much pressure for Strategy, so the recent rumors that Strategy will collapse are unfounded.
Of course, what will happen in the future is unpredictable, and we do not know if there will be any other major black swan events. But if there are no such major black swan events (such as Strategy going bankrupt due to other reasons, or policy factors, or changes in the global macroeconomic situation, etc.), we believe that Strategy's approach will have no major risks before 2028. By 2028, as some debts mature, bondholders may demand cash repayment (rather than stock), and if the situations mentioned in the summary paragraph above occur at that time, Strategy may be forced to sell some bitcoins to repay, which could then deal a heavier blow to the crypto market and add fuel to the fire, possibly triggering some chain risks.
Many people know that bitcoin dollar-cost averaging is a relatively good investment method, but even if we put aside the issue of capital size, in terms of personal style and courage, most of the self-proclaimed staunch believers of bitcoin are only juniors compared to Michael Saylor.
In fact, encountering a crash of this magnitude is not scary, but rather a new opportunity for accumulation for some people, just as the partner shared in the group: no one can time the exact bottom, and what we can do is to go against human nature in the panic of each crash. Similarly, no one can sell at the exact top, and what we can do is to continue to go against human nature in the frenzy of each bull run.
As for the future market trend, even though we still maintain a certain optimism (referring to the previous series of articles, optimism does not mean that there will be no new black swan events this year, nor does it mean that bitcoin will definitely hit a new high, but only a mental state based on our overall position), but I guess many partners have already fallen into the pessimism of the bear market. Anyway, continue to manage your position based on your own risk preference, and you don't have to worry about the bull or bear market, just focus on the probability of ups and downs in different stages of the market. The crypto market last year formed a positive variable due to Trump, and now it has formed a negative variable due to Trump, isn't it interesting? In fact, the development of the market itself is a continuous unpredictability, wish you all the best!
That's all for today, the sources of the pictures/data mentioned in the text have been supplemented in the Notion of the talk. In addition, we have sorted out a lot of methodological content last year, which has been compiled into the e-book "Blockchain Methodology" (Volume 1 + Volume 2), with a total of about 620,000 words. Readers with patience can consider reviewing and reading more content in the e-book, click here to enter the portal>>
