Strategy (MSTR) Crashes 55%Is A $44 Billion Bitcoin Liquidation Possible?

Shares of Strategy (NASDAQ: MSTR) have dropped by over 55% from the November 24 high at $543 to around $250. With the software intelligence firm now holding approximately 499,096 Bitcoinworth around $44 billion at current pricesmarket participants are wondering whether the company could ever face a forced liquidation of its massive Bitcoin treasury.

On Tuesday, analysts from The Kobeissi Letter (@KobeissiLetter) took to X to provide a comprehensive thread analyzing this scenario. Heres what they had to say: The MicroStrategy liquidation: As MicroStrategy, MSTR, falls over -55%, many are asking about forced liquidation. The company now holds $44 BILLION worth of Bitcoin, could they be forced to sell it? Is liquidation even possible?

Is A Forced Bitcoin Liquidation Possible?

According to The Kobeissi Letter, MicroStrategys Bitcoin holdings total approximately 499,096 BTC, currently worth $43.7 billion. The firms average cost basis sits around $66,350 per Bitcoin. This naturally raises concerns about what happens if Bitcoins price were to drop significantly below MicroStrategys average entry point.

Let us begin by stating that this isnt the first time liquidation is mentioned. MSTR has been buying Bitcoin for years and there have been MULTIPLE bear markets since then. This includes the 2022 bear market when Bitcoin fell from ~$70K to ~$15K. Is this time different?, the analysts write.

Critically, MicroStrategys operations rely on raising capitaloften through convertible notesto buy more Bitcoin. The Kobeissi Letter points out that MicroStrategy currently carries about $8.2 billion in total debt for its $43.4 billion Bitcoin holdings, representing a roughly 19% leverage ratio. Much of this debt is held in convertible notes maturing around 2028.

Just about the only way a forced liquidation occurs if there is a fundamental change at the company. This COULD require MSTR to liquidate Bitcoin holdings if an early redemption is called on the notes, the experts from The Kobeissi Letter argue.

A fundamental change could include corporate bankruptcy, or a vote by shareholders to dissolve the companyboth scenarios that The Kobeissi Letter stresses are remote under the current structure. Michael Saylor, MicroStrategys Executive Chairman and prominent Bitcoin advocate, holds 46.8% of the companys voting power, meaning he could effectively block decisions leading to liquidation.

Despite the steep share price decline, The Kobeissi Letter suggests that an outright forced liquidation is highly unlikely. The structure of the convertible notes and MicroStrategys ability to raise capital give the firm significant flexibility. Even so, if Bitcoin were to experience a protracted and severe price dropwell below its current levelsMicroStrategy might face challenges in servicing its debt and raising fresh capital:

However, what if these convertible bonds remain below the conversion price at maturity, beginning in 2027+? For this to happen, Bitcoin would need to fall well over 50% from current levels and remain there.

Michael Saylor has repeatedly brushed off the liquidation scenario. According to The Kobeissi Letter: Michael Saylor was asked about liquidation recently. His answer was that even if Bitcoin fell to $1, they still would not get liquidated. They would just buy all of the Bitcoin. While this sounds good in theory, the convertible note holders cannot be forgotten.

MicroStrategys business modelraising funds to buy Bitcoin, potentially driving the price higher, and then issuing new shares at a premiumdepends on investor confidence. If shares continue to falter, or if Bitcoin dives well below MicroStrategys average entry price, the firms ability to attract capital could be severely tested: We are now witnessing the first bear market in MicroStrategy since it gained popularity in 2024. The question becomes: will investors continue to buy the dip here? Michael Saylor says Bitcoin is on sale.

However, with Saylors voting power and the long-dated convertible notes, a forced liquidation seems highly unlikely in the near term.

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

Text source: NewsBTC

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