“Never sell your Bitcoin” is Michael Saylor’s motto — but in a once-unthinkable turn of events, Strategy has admitted this might have to happen.
We’ve talked about the hammering that the company’s stock is taking for a couple of weeks now, meaning its market cap is worth less than the Bitcoin it holds.
And given its BTC acquisitions have been funded by debt, critics have questioned whether Strategy can meet all its financial obligations in the event of a downturn.
That’s what made Monday’s announcement so significant. The embattled business announced it was creating a $1.4 billion USD reserve to keep up with dividend and interest payments… and this was achieved by diluting current shareholders.
Worse still, it has dramatically slashed earnings guidance that was released barely a month ago — on October 30. At the time, based on Bitcoin being worth $150,000 by the end of 2025, Strategy had estimated it would generate a net income of $24 billion for the whole of this year.
Fast forward to now, and the company has revised this price range down to a mere $85,000 to $110,000 — a range that creates a great deal of uncertainty. This means Strategy could finish December with anywhere between an annual loss of $5.5 billion… or pure gains of $6.3 billion. What a difference a month makes.
This is the figure that analysts are keeping an eye on: Strategy’s mNAV — a ratio that compares its market value to its Bitcoin holdings. That currently stands at 1.13, putting it perilously close to needing to take radical action. As chief executive Phong Le said on a recent podcast:
“We can sell Bitcoin and we would sell Bitcoin if we needed to fund our dividend payments below 1x mNAV.”
The idea of Strategy (formerly MicroStrategy) offloading BTC for the first time since August 2020 — even a single sat — is enough to send chills down a Bitcoiner’s spine. It would mark a painful U-turn from Saylor, suggest the company is in distress, and confirm the days of an “infinite money glitch” are well and truly gone.
But at what point would Strategy officially be in financial jeopardy? How would a confirmed selloff impact the wider crypto market? And has Saylor’s aggressive approach to snap up as much Bitcoin as possible — with the company now controlling 3% of this cryptocurrency’s total supply — created a “concentration risk” that could backfire on the entire industry?
The Egg Analogy
One analogy that’s been doing the rounds on X comes from @Derivatives_Ape on X, who has compared Strategy to a man who buys eggs at the market.
Their story describes someone who starts buying eggs when they’re worth just $1 — and continues to do so as prices rise, elated as his portfolio surges in value. By the time an egg costs $20, he chooses to sell.
“He goes to the market and announces, ‘I’m ready to sell all my eggs!’ The vendor looks at him and says: ‘To who? You’re the egg guy!’”
It’s a neat way of saying this: it’s possible that Strategy has been responsible for Bitcoin’s astronomical success. While there are BTC treasury companies attempting to emulate this approach, they have nowhere near as much of a warchest. And even though Saylor has been trying to encourage tech giants like Microsoft to do the same, his pitches have been falling on deaf ears. Nation-state adoption has also hit the buffers, with America’s Bitcoin reserve yet to exist.
However, there is an argument that this analogy is unfair. Why? Because there have been other egg buyers — primarily in the form of institutional investors piling into Bitcoin ETFs since January 2024. The fact that they are now finally available to buy through Vanguard, one of the world’s biggest investment platforms, has been a driving factor in BTC’s impressive rebound back above $90,000.
Nonetheless, there are no guarantees that this recovery will continue — and a return above six figures may be a tough nut to crack. So: if Bitcoin’s price begins to slide again, when would Strategy find itself in a crisis?
Javed Khattak, the co-founder and chief financial officer of cheqd, told Cryptonews that the company’s declining market cap is a problem because it strikes at the very heart of its business model — making expansion difficult.
“Once a company in this position trades at a discount to its assets, equity issuance becomes dilutive, refinancing becomes more expensive, and the entire mechanism of leveraging its balance sheet to acquire more Bitcoin becomes much harder to sustain.”
Khattak did go on to note that Strategy has managed to weather bear markets in the past — and has successfully recovered from other drawdowns. Back in 2022, when Bitcoin crashed from $48,000 to $16,000, the company’s stock “traded well below the value of its holdings and the business faced scrutiny,” but still had an ace up its sleeve.
“The company held through the downturn, avoided forced selling, and ultimately benefitted when Bitcoin rebounded. That earlier recovery, however, took place under very different conditions. At the time, equity markets were still willing to assign Strategy a premium to its Bitcoin holdings, capital raising was less dilutive, and investors lacked easy access to spot BTC ETFs, making the stock an attractive proxy. Today, the situation is more complicated.”
There’s no need for proxies now given the booming trade in exchange-traded funds tracking Bitcoin’s spot price — worth a total of $120 billion, 6% of this cryptocurrency’s market cap, and led by the likes of BlackRock and Fidelity.
“With increasing dilution, a heavier reliance on capital markets and growing competition, Strategy faces structural pressures that weren’t present during previous downturns. In that sense, while the company has navigated similar territory before, this is the first time that the underlying mechanics of its model — not just Bitcoin’s price — are being actively questioned.”
Khattak went on to warn that a short-term rebound in Strategy’s share price seems unlikely without a “meaningful recovery” in Bitcoin — and there are other threats on the horizon, too.
“Strategy also faces potential index exclusion risk, which could trigger mechanical selling by passive vehicles. Meanwhile, the company’s updated earnings guidance shows results swinging from sizable losses to significant gains solely baked on Bitcoin’s year-end price, underscoring just how tied the equity is to a single asset’s volatility.”
So: if Strategy is backed into a corner and needs to offload some of its vast BTC reserves, would this spark market panic?
“It could, primarily because of the signalling effect … If the largest and most visible corporate Bitcoin holder were to sell, even for liquidity or operational reasons, the market could interpret that as evidence of stress. In a segment already dealing with leverage, declining equity values and forced selling, the psychological impact of such a move could outweigh the actual supply hitting the market.”
Khattak has painted a pretty bleak scenario here — but not everyone is betting against Strategy, nor thinks the writing’s on the wall for a bold experiment that at one point generated tens of billions of dollars in paper profits.
Pierre Rochard, CEO of The Bitcoin Bond Company, told Cryptonews that the company would only be in true financial jeopardy if there was “a combination of government budget surpluses, declining national debt and high real interest rates.”
“Without those factors in place, there is structural support for Strategy as fiat money printing drives Bitcoin adoption.”
He also shrugged off the impact that any BTC sale by this company would have, adding:
“The Bitcoin market has sustained more mass panics over the past 16 years than any other asset, as it climbed in value from $0 to more than $1 trillion. There will be more mass panics going forward whether Strategy sells Bitcoin or not.”
Rochard went on to argue that Strategy’s concentration risk will diminish as Bitcoin treasury companies, ETF adoption and sovereign reserves continue to grow — and it may take time for the stock to regain momentum.
“Strategy’s stock performance is a combination of Bitcoin price and sentiment. Even if Bitcoin rallies, it will likely take time for sentiment to catch up.”
Indeed, it will take time. Strategy’s stock has plunged by 51% over the past year — by comparison, Bitcoin is relatively flat, eking out a 0.09% gain at the time of writing.
If Saylor is worried, he isn’t showing it. In his eyes, “volatility is vitality.” Well, there could be plenty of wild swings in the months ahead — especially if he breaks his one golden rule.
The post In Depth: Will Bitcoin Crash if Strategy Starts Selling? appeared first on Cryptonews.
