Despite a 9% recovery on Tuesday, Bitcoin (BTC) has experienced considerable volatility, with its price plummeting to as low as $84,000 just 24 hours ago. This downturn has had a significant impact on Strategy (previously MicroStrategy) the public company that holds the largest BTC reserves, currently boasting over 650,000 coins.

Strategy T-Rex ETFs Plummet Nearly 85%

NewsBTC reported that the company’s CEO, Phong Le, suggested the possibility of selling some of their Bitcoin holdings in light of the current market conditions. 

Alongside this, the company’s leveraged exchange-traded funds (ETFs) have also faced substantial losses, intensifying worries about Strategy’s financial health.

Reuters highlighted that Strategy’s leveraged ETFs, which are designed to magnify returns on the firm’s stock, have been among the largest casualties of this year’s cryptocurrency slump. 

Two specific ETFs, the T-Rex 2X Long MSTR Daily Target ETF and the Defiance Daily Target 2x Long MSTR ETF, have seen dramatic declines, losing nearly 85% of their value this year. 

Additionally, the T-Rex 2X Inverse MSTR Daily Target ETF has dropped by 48% in the same time frame. In this environment, shares of Strategy, MSTR, have fallen more than 40% this year, driven primarily by Bitcoin’s price crash. 

Investor attention is now focused on Strategy’s “mNAV” (market net asset value) metric, which compares the company’s enterprise value to its Bitcoin holdings. 

Following Le’s comments, where he mentioned the firm might consider selling cryptocurrencies if the mNAV drops below 1, concerns grew about the firm’s long-term outlook. Current estimates place this ratio around 1.1, according to calculations by Reuters.

Analysts Remain Optimistic

Mike O’Rourke, the chief market strategist at JonesTrading, noted that Le’s remarks diminish the company’s message of steadfastness in holding Bitcoin, even amid market volatility. 

The company has also revised its full-year outlook, warning of a potential profit ranging from $6.3 billion to a loss of $5.5 billion, a stark adjustment from its earlier forecast of $24 billion in net profit. This prior estimate, made on October 30, anticipated Bitcoin reaching $150,000 by year-end.

Commenting on the shifting strategies within the firm, Vincenzo Vedda, chief investment officer at DWS, remarked, “Great strategy from Strategy, while prices go up. When they go down, well, the strategic options left to the company are limited.”

Since entering the Nasdaq 100 index, Strategy’s shares have dropped more than 70% from their peak in November 2024, more than halving in value over the year. 

Despite this dismal performance, analyst sentiments remain relatively optimistic; of the 16 brokerages monitoring Strategy, 10 recommend it as a “buy” while four suggest a “strong buy,” with an overall median price target of $485, reflecting a potential 183% increase over the next year based on LSEG data.

When writing, the market’s leading cryptocurrency, Bitcoin, managed to recover the $92,000 line.

Featured image from DALL-E, chart from TradingView.com 

In a turbulent market marked by falling prices, Bitcoin (BTC) has once again dipped below the $85,000 threshold, driven by growing speculation that Strategy, formerly known as MicroStrategy, may be on the verge of selling some of its Bitcoin holdings. 

This intensified after a recent interview on the What Bitcoin Did podcast, during which Strategy CEO Phong Le was directly asked whether the company would consider parting with any of its BTC holdings. 

While the firm’s former CEO, Michael Saylor, has consistently maintained a resolute stance against selling, Le’s comments have raised concerns about potential sales in the future.

Is A Bitcoin Sell-Off Imminent? 

Le indicated that if Strategy’s stock trades below the actual value of its Bitcoin holdings and the company is unable to raise additional capital for preferred dividends, selling some Bitcoin could become a necessity. 

“If the stock trades below the value of our Bitcoin… then mathematically we would have to sell some Bitcoin. It would be the last resort,” he explained. 

While this does not confirm an imminent sale, it visibly places the option on the table, leading to increased speculation about a forced sale as preferred dividend payments approach due on December 31.

Adding to the unease, Strategy disclosed in a recent filing with the US Securities and Exchange Commission (SEC) that it has established a USD Reserve of $1.44 billion to cover these upcoming preferred dividends and mitigate the interest on its substantial debt. 

This reserve was funded through the proceeds from sales of its class A common stock under the company’s at-the-market offering program. Such moves have diluted current shareholders and contributed to a nearly 11% drop in Strategy’s stock price.

Strategy Downgrades BTC Price Forecast

This shift contrasts sharply with the company’s previous forecasts, which predicted that Bitcoin would soar to $150,000 by the end of the year. Strategy has now revised its expectations, projecting prices to range between $85,000 and $110,000. 

The forecast for BTC yields has also been revised down to 24% from a previous estimate of 30%, along with projected Bitcoin gains decreasing significantly from $20 billion to $10.6 billion at the midpoint.

As Bitcoin’s value continues to plummet, it further unravels Strategy’s financial outlook. Nevertheless, social media experts have pointed to a paradox within the company’s messaging. 

AlejandroXBT noted that while Saylor has consistently stated he will never sell Bitcoin, he has been conducting private presentations to clients outlining various strategic approaches, suggesting a potential disconnect between public declarations and private planning.

When writing, the market’s leading cryptocurrency trades at $84,880, recording major losses of over 7% in the 24-hour time frame. 

Featured image from DALL-E, chart from TradingView.com