Will Strategy Liquidate Bitcoin Holdings? CEO Hints at Concerns

In a volatile market, Bitcoin (BTC) has recently fallen back below the $85,000 mark. This decline comes amid rising speculation surrounding Strategy, formerly known as MicroStrategy, and the potential sale of some of its Bitcoin assets. The concern intensified following comments made by Strategy CEO Phong Le during his appearance on the What Bitcoin Did podcast, where he was asked whether the company might consider selling any of its BTC.

Key Takeaways

Strategy's CEO hinted that Bitcoin sales may be necessary if stock prices fall below the value of their BTC holdings.
The company has set up a $1.44 billion USD Reserve for preferred dividends, adding to liquidity concerns.
Forecasts for Bitcoin prices have been revised downward significantly, from $150,000 to between $85,000 and $110,000.

Strategy

Is A Bitcoin Sell-Off on the Horizon?

Le remarked that if Strategy's stock price remains below the true value of its Bitcoin holdings and the company struggles to raise additional capital for preferred dividends, they might have to sell some BTC. “If the stock trades below the value of our Bitcoin… then mathematically we would have to sell some Bitcoin. It would be the last resort,” he stated. While these comments do not signal an immediate sale, they place the possibility on the table, especially as the deadline for preferred dividend payments approaches on December 31.

Moreover, in its recent filing with the US Securities and Exchange Commission (SEC), Strategy revealed it had established a USD Reserve of $1.44 billion. This reserve is intended to address pending preferred dividends and to help manage the interest on its considerable debt. The reserve was created using proceeds from sales of its class A common stock, which has led to dilution for current shareholders and an approx. 11% decline in Strategy’s stock price.

Strategy Downgrades Bitcoin Price Outlook

In a significant shift, Strategy has altered its Bitcoin price forecasts, previously predicting that BTC would reach $150,000 by year-end. The new projections suggest Bitcoin prices will range from $85,000 to $110,000. Furthermore, the anticipated BTC yields have been lowered from 30% to 24%, and expected Bitcoin gains have dropped from $20 billion to approximately $10.6 billion at the midpoint.

As Bitcoin's value continues to decline, this also complicates Strategy’s financial prospects. Observers on social media have pointed out a contradiction in the company’s communications. Notably, AlejandroXBT highlighted that, despite Saylor's firm stance on never selling Bitcoin, he has conducted private presentations for clients discussing various strategies, indicating a potential disparity between public statements and internal strategies.

As of now, Bitcoin is trading at $84,880, having suffered significant losses of over 7% in the past 24 hours.

Strategy

The daily chart shows BTC dipping below this crucial $85,000 level, prompting further scrutiny of Strategy’s financial strategy.

Featured image from DALL-E, chart from TradingView.com