MicroStrategy currently has more debt than Bitcoin is worth

For the first time in the company's history, the market value of the strategy was less than the net asset value of its Bitcoin holdings.

This reversal means that the total value of the Bitcoins owned by the company is now less than the total amount of debt it took on to acquire them. Analysts fear that if the bearish situation continues, Strategy could be in a death spiral.

debt turns into debt

Today's sharp decline in Bitcoin is closely tied to increased pressure on the asset's largest corporate holder, Strategy (formerly MicroStrategy).

Market sentiment suddenly changed after Bitcoin fell below the $100,000 threshold and is trading around $95,562 at the time of writing. The economic downturn has heightened concerns about Strategy's leveraged positions, adding further pressure to an already fragile market environment.

The restructuring also renewed questions about the long-term viability of allocation models that rely heavily on aggressive leverage. Chairman Michael Saylor is using billions of dollars in borrowed capital to expand his Bitcoin holdings, increasing both the returns and the risks.

As Bitcoin rises, that leverage amplifies profits. However, if it falls, the company's debt burden becomes a vulnerable point.

The strategy has sparked new concerns among traders that the strategy could end up in what some are calling a “death spiral.” Due to the fall in BTC prices, the value of the company's collateral is steadily decreasing.

In that scenario, the company could be forced to sell some of its holdings to meet its obligations. Even if such a scenario does not materialize, the possibility alone is enough for market participants to change their positions.

Mr. Thaler mentions speculative selling

Beyond the strategy's structural leverage risk, market participants are also concerned about the impact on the market if Mr. Saylor were to sell some of his holdings.

Strategy currently owns 641,692 BTC, which is approximately 3% of the total circulating supply. If the company is forced to dispose of a significant portion of its stash, the resulting increase in supply could have a significant impact on the market.

The growing concerns prompted Saylor to address speculation about a possible fall in Bitcoin. In an interview with CNBC, the Strategy founder reiterated his long-held belief in Bitcoin and denied rumors of a sale.

“In my opinion, Bitcoin will outperform gold and outperform the S&P. Bitcoin is digital capital, so if you're a long-term investor, this is the place to be,” Saylor said.

Despite his confidence, today's developments inevitably raise concerns about the structural weaknesses of Strategic's accumulation strategy.

The article MicroStrategy Now Owes More Than Its Bitcoin Is Worth appeared first on BeInCrypto.