Facing Liquidation Risk: Michael Saylor’s Strategic Challenge in Managing Bitcoin

Jakarta, Pintu News – In 2023, Michael Saylor, founder of MicroStrategy now known as “Strategy,” faces a major challenge after the price of Bitcoin BTC->Current BTC PriceRp 0Market Cap-Trading Volume-Circulating Supply- fell more than 55% since the beginning of the year. The company holds 499,096 BTC worth around USD 44 billion (IDR 717 trillion), but many are wondering if Strategy will be forced to sell their Bitcoin.

Bitcoin’s price drop far below their average purchase price of 66,350 USD (Rp1.08 billion) per BTC has now left Strategy facing billions of dollars in unrealized losses.

Michael Saylor’s Bitcoin-Dependent Business Strategy

MicroStrategy, now known as Strategy, has built its entire business model on accumulating Bitcoin, with funds coming from a mix of debt and share issuance. The company currently has a debt of USD8.2 billion (IDR133 trillion) with a debt-to-Bitcoin ratio of around 19%.

The company’s largest debt is in the form of convertible debentures, which allow creditors to convert their loans into MSTR shares if the company’s share price is above a certain point. In the event of a fundamental change in the company, this would most likely trigger the liquidation of their Bitcoin assets.

Nonetheless, Michael Saylor insists that companies will not be forced to sell their Bitcoin, even if the price of Bitcoin falls to extremely low figures, such as 1 USD (IDR 16,330). In a recent interview, Saylor expressed confidence that the company will continue to accumulate Bitcoin, despite facing potential short-term losses.

However, some analysts warn that if the price of Bitcoin continues to fall dramatically, and reaches a point where the debt must be repaid by 2027, the company could be in a very difficult position.

Also Read: Solana (SOL) Market Sentiment Sluggish, Here’s the Latest Technical Analysis! (2/27/25)

Bitcoin Reserve Liquidation Challenges and Plans by US States

One of the biggest risks faced by Strategy is the possibility of forced liquidation in the event of a major structural change in the company, such as bankruptcy or a change in share policy that requires a shareholder vote. At that point, Strategy would likely be forced to sell their Bitcoin reserves. While bankruptcy does not seem imminent, Saylor is closely monitoring the market situation and other strategic decisions.

On the other hand, Saylor also encouraged the United States government to collect Bitcoin as part of the country’s reserves. At the annual CPAC conference, he stated that the US government could buy up to 20% of the total Bitcoin supply at a very low price and use it to strengthen the value of the US dollar.

Some states in the US, such as Utah, have now started proposing to keep Bitcoin as part of their state reserves. In fact, former President Donald Trump has also signed an executive order to explore the possibility of establishing a federal Bitcoin reserve.

Controversy about Bitcoin as a State Reserve Asset

However, not everyone agrees with Saylor’s idea. Some economists and cryptoeconomics experts, such as Christian Catalini from MIT, argue that Bitcoin does not meet the criteria to become a state reserve asset. According to Catalini, strategic reserves are typically used to ensure economic stability and provide quick access during a crisis.

He fears that if the US starts accumulating large amounts of Bitcoin, it could undermine the dominance of the US dollar as the global reserve currency. However, Saylor remains optimistic that Bitcoin could become an important asset for the country, despite warnings that the move could open up opportunities for other countries, such as China or Russia, to challenge the dominance of the US dollar.

Conclusion

In the face of Bitcoin’s unpredictable market volatility, Michael Saylor and Strategy continue to try to maintain their Bitcoin accumulation strategy. Despite major challenges threatening their financial stability, this approach opens up further discussion on the future of Bitcoin as a reserve tool and whether major countries will follow suit.

Meanwhile, the uncertainty over whether Bitcoin (BTC) will be able to survive in the long run continues to be a debate that has yet to find a definitive answer.

Also Read: Bitcoin (BTC) is heading towards $90,000, XRP and BNB are on the rise! (2/27/25)

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*Disclaimer

This content aims to enrich readers’ information. Pintu collects this information from various relevant sources and is not influenced by outside parties. Note that an asset’s past performance does not determine its projected future performance. Trading crypto carries high risk and volatility, always do your own research and use cold hard cash before investing. All activities of buying andselling Bitcoin and other crypto asset investments are the responsibility of the reader.

Reference:

• Cryptopolitan. “Will Michael Saylor’s Strategy Be Forced to Sell Off Its Bitcoin as Prices Tumble Further?” Accessed February 27, 2025.
• Featured Image: Unchained Crypto