Can MicroStrategy Levered Bitcoin Bet Crash The Market?
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As the Bitcoin market faced turmoil surrounding the possible bankruptcy of Genesis Trading and Digital Currency Group (DCG), talk kept rising that Michael Saylor and MicroStrategy’s Bitcoin bet could be at risk if the price continues to fall.
This elephant in the room has been studied by Will Clemente of Reflexivity Research and Sam Martin of Blockworks Research. In their report, they look at questions like whether MicroStrategy has a Bitcoin liquidation price, how high it is, and how the company’s debt is structured.
MicroStrategy has the largest Bitcoin holdings of any listed company, totaling 130,000 BTC. In the past, the company even took out new loans to increase its Bitcoin holdings.
Specifically, MicroStrategy borrowed $2.37 billion to buy its Bitcoins at an average of about $30,000 per BTC. Saylor’s corporate debt profile can be found in the table below.
Is MicroStrategy and Saylor’s Leveraged Bitcoin Bet in Danger?
According to the research report, the convertible bonds incur minimal interest costs for MicroStrategy because the bonds were issued at very favorable MSTR exchange rates.
In addition, the share exchange cannot take place on June 15, 2025 and August 15, 2026 at the earliest, unless there is a “fundamental change” in the company.
According to Reflexivity Research, this includes a NASDAQ or NYSE listing, a MicroStrategy merger or acquisition, or a change in majority ownership of the company.
Since Michael Saylor owns 67.7% of the voting power, the latter scenario is highly unlikely, so convertibles are not a big risk.
The 2028 secured loans are bad for several reasons, according to the report. They carry a high fixed interest rate, tie up 11.5% of BTC holdings and can cause problems if the maturity date is triggered.
“However, it does not pose an immediate threat to MicroStrategy,” Blockworks Research said.
For Silvergate’s 2025 $205 million secured loan with approximately 85,000 liquid BTC, Saylor’s liquidation price for the loan is achieved at the Bitcoin spot price of $3,561. So this does not cause an immediate risk either. The reflexivity study states:
While the aforementioned risks to MicroStrategy and its BTC reserves are relatively far from becoming immediate concerns, the bigger concern lies in the company’s ability to pay interest on its debt.
The operating result of MicroStrategy’s software business shows a significant deterioration in profitability, and a possible recession may further affect the operating result.
In its latest 10-Q report, the company itself warns that it may suffer operating losses in the coming seasons. At the same time, Saylor’s company has almost $67 million in liquid assets that will act as a buffer over the next 6-12 months.
In addition, the company has approximately 85,000 liquid BTC on its balance sheet to top up the collateral if Bitcoin falls below $13.5,000, raising the Silvergate loan’s loan-to-value ratio above 50%.
“However, the software business needs to recover to avoid a forced sell-off from BTC in 2024,” Blockworks Research noted. For now, though, MicroStrategy’s Bitcoin bet isn’t anything to worry investors about.
At press time, BTC price was again rejected by major resistance at $16,600.