$44 Billion Bitcoin Liquidation Possible?

Shares of Strategy (Nasdaq: MSTR) have fallen by more than 55% from the highest height from November 24 to $ 543 to around $ 250. Because the software intelligence company now has around 499,096 Bitcoin – which is around $ 44 billion at current prices Has – the participants in the market ask whether the company could ever experience a forced liquidation of its huge Bitcoin Treasury.

On Tuesday, analysts from the Kobeissi letter (@kobeissiletter) took X to offer an extensive wire Analyze this scenario. This is what they had to say: “The micro strategy -reading: as a micro strategy, MSTR, more than -55%falls, many ask about ‘forced liquidation’. The company now has $ 44 billion in Bitcoin, they can be forced to do it Selling is even possible?

Is forced Bitcoin liquidation possible?

According to the Kobeissi letter, Bitcoin Holdings from MicroSstratey is approximately 499,096 BTC, currently worth $ 43.7 billion. The average cost basis of the company is around $ 66,350 per bitcoin. This of course evokes concern about what happens if the price of Bitcoin would fall considerably below the average access point of micro strategy.

“Let’s start by saying that this is not the first time that liquidation is called. MSTR has been buying Bitcoin for years and there have been several bear markets since then. This includes the Berenmarkt from 2022 when Bitcoin dropped from ~ $ 70k to ~ $ 15k. Is this time different?, The analysts write.

Related lecture

It is crucial that the activities of MicroStrategy rely on increasing capital – often through convertible notes – to buy more Bitcoin. The Kobeissi letter indicates that MicroSstratey currently has around $ 8.2 billion in total debt for its $ 43.4 billion Bitcoin Holdings, which represents a lever ratio of around 19%. Much of this debt is held in convertible banknotes that mature around 2028.

“Just about the only way in which a ‘forced liquidation’ occurs when there is a ‘fundamental change’ at the company. This could require MSTR to liquidate Bitcoin Holdings if an early repayment is called on the notes, ”say the experts of the Kobeissi letter.

A “fundamental change” can include the bankruptcy of companies, or a vote by shareholders to dissolve the company – both scenarios that are the Kobeissi letter stress on remote under the current structure. Michael Saylor, executive chairman of MicroStrategy and a prominent Bitcoin lawyer, has 46.8% of the company’s voting joint, which means that he could effectively block decisions that lead to liquidation.

Related lecture

Despite the steep fall in the share price, the Kobeissi letter suggests that an outright forced liquidation is ‘very unlikely’. The structure of the convertible notes and the ability of micro strategy to attract capital gives the company considerable flexibility. Still, if Bitcoin experienced a long -term and serious fall in price – well under the current levels – the micro strategy could challenge challenges for maintaining his fault and attracting new capital for doing:

“What if these convertible bonds remain under the conversion price in the term, starting in 2027+? To make this happen, Bitcoin should fall more than 50% from the current levels and stay there. “

Michael Saylor has repeatedly removed the liquidation scenario. According to the Kobeissi letter: “Michael Saylor was recently asked about liquidation. His answer was that even if Bitcoin dropped to $ 1, they would still not be liquidated. They would “just buy all Bitcoin.” Although this sounds good in theory, the holders of the Cabriolet cannot be forgotten. ‘

The Micro Strategy business model – conquering funds to buy Bitcoin, possibly to drive the price higher and then issue new shares at a premium – depending on the trust of investors. If shares continue to falter, or if Bitcoin dives far below the average admission price of micro strategy, the company’s ability to attract capital can be seriously tested: “We are now witnessing the first ‘bear market’ in micro strategy, because it in 2024 Popular is: will investors continue to buy the dip here: “Bitcoin is for sale.” ‘

With Saylor’s voting power and the long-dating convertible banknotes, forced liquidation, however, seems very unlikely in the short term.

At the time of the press, BTC traded at $ 89,245.

Featured image made with dall.e, graph of tradingview.com