Source: Talk Outside the Box
After several consecutive days of plummeting, today (February 28) we finally see Altcoin with a 7 in front of it again. 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, beginning to deplete market liquidity.
On Friday, January 24, the global AI stock market 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 large-scale liquidation crash.
On Friday, February 14, the release of the Argentine President's LIBRA token 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 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 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 BTC, 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 an unrealized loss, as shown in the figure below.
Then, let's compare the stock price trend of MSTR. In fact, the stock price 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 decline 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 the issuance of convertible bonds (i.e., external funds), 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 historical background is that due to the outbreak of the COVID-19 pandemic in 2020, there was a global liquidity crisis, and all countries began to stimulate the economy through monetary easing policies, which also led to the depreciation of fiat currencies and inflation risks. At that time, Michael Saylor (the founder of Strategy) began to re-evaluate the value of BTC, and he believed that if the global fiat currency supply grew at a rate of 15% per year, people would need a non-fiat-linked asset to avoid it. Finally, under Michael Saylor's leadership, Strategy began to transform from a software company to a financial company and chose to embrace the BTC strategy, kicking off a "buy, buy, buy" mode.
The core of this BTC strategy is that Strategy itself can obtain the potential benefits of the long-term upward trend of BTC, while also bearing the potential risks of short-term BTC declines.
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, if one day their debt scale exceeds their company's asset scale, the possibility of further financing will be greatly reduced. Or 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 bankruptcy is not high.
However, there is one situation that may put some pressure on Strategy. For example, 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 continuous crash of BTC leads to the total value of Strategy's BTC holdings being lower than the total amount of its convertible bonds, then it 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 conditions that can put pressure on Strategy need to simultaneously meet several conditions: buying BTC frantically at high prices (continuously raising the cost of BTC), BTC being in a long-term bear market (lack of liquidity leading to financing difficulties), BTC price starting to crash, the total value of BTC holdings being lower than its debt scale, and MSTR lacking liquidity and starting to crash (which will also lead to difficulties in new financing).
If the pressure is strong enough, then in theory Strategy will have several coping strategies:
1. Continue to issue new shares and use the funds to repay.
2. Continue to issue new bonds and use the new bonds to repay the old debts.
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.
In plain language, as long as MSTR's market capitalization is greater than the total value of its BTC holdings, it means 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.
And the increase in "BTC content" means that the net asset value per share of MSTR is actually growing. In this way, for shareholders (investors), it is still a worthwhile (profitable) thing for Strategy to continue buying more BTC.
2. Comparison of Strategy's debt scale and the value of its BTC holdings
Strategy's current debt size is about $8.2 billion, and this debt is supported by $40.7 billion worth of Bitcoins as reserves, which means their current leverage ratio is only around 20%, which seems quite healthy at the moment. As shown in the figure below.
Moreover, these debts are mainly the convertible bonds mentioned in the previous article, and most of the bonds will not mature until after 2027, so it seems that Strategy currently 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 drops to $1, Strategy will not be liquidated, on the contrary, we will buy all the Bitcoins."
"If necessary, I suggest selling a kidney, but keeping the Bitcoins." (Meaning that he won't sell Bitcoins even if he has to sell a kidney haha)
He even hinted in an interview that he will destroy his own Bitcoin private keys after his death to ensure that the Bitcoins he holds will never be sold.
Regardless of whether the statements of this capitalist are true or false, he is indeed buying Bitcoins with real money (hard cash), and is the most typical representative and model figure of Bitcoin dollar-cost averaging.
Of course, Saylor's statements also have their own basis, because he currently holds 46.8% of the voting rights of Strategy (holding 10% of the company's shares), which means he almost completely controls the decision-making power of MSTR. In addition, it is said that he personally holds about $1.9 billion worth of Bitcoins.
In summary, even though Bitcoin has recently faced consecutive price crashes, it does not seem to put too much pressure on Strategy, so the recent rumors that Strategy will collapse are unfounded.
Of course, what will happen in the future is unpredictable, and we don't know if there will be any bigger black swan events in the future, 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 strategy is basically risk-free before 2028. By 2028, as some debts mature, bondholders may demand cash repayment (rather than stocks), 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 pour oil on the fire, and may even trigger some chain risks.
Many people know that Bitcoin dollar-cost averaging is a relatively good investment method, but even if we set aside the issue of fund size, in terms of personal style and courage, the vast majority of self-proclaimed staunch believers of Bitcoin can only be considered as younger brothers in front of Michael Saylor.
In fact, encountering a crash of this magnitude is not terrible, and for some people it is even a new opportunity to accumulate. As a partner shared in the group: no one can time the exact bottom, and what we can do is to act against human nature in the midst of each panic crash. Similarly, no one can sell at the exact top, and what we can do is to continue to act against human nature in the midst of each frenzy of surges.
As for the future market trend, even though we ourselves 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 create new highs again, but only a mental expression based on our overall position status), but I guess many partners have already fallen into the pessimism of the bear market. In any case, continue to manage your position based on your own risk preference, and simply forget about the bull market or bear market, and just focus on the probability of ups and downs in different stages of the market. Last year's crypto market 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 good luck!
