Oh, dear readers, have you heard the latest news from the world of finance? Shares of Strategy, formerly known as MicroStrategy, have taken a tumble of approximately 16% in the year-to-date. This unfortunate turn of events has occurred amidst Bitcoin‘s ongoing correction.
The stock’s sudden sell-off has brought to light longstanding questions about the sustainability of its Bitcoin buying spree. On the 25th of February, Bitcoin’s price dropped around 4% to a paltry sum of $88,000.
The company’s “strategy is largely contingent on the ability to raise additional capital” backed by its growing Bitcoin treasury, as The Kobeissi Letter, a market analysis firm, so eloquently put it in a post on the X platform.
“In a situation where their liabilities rise significantly higher than their assets, this ability could deteriorate,” they said. 🙄
However, stock analysts remain bullish on MSTR’s prospects for a rebound. On the 6th of February, analysts at Benchmark, a stock researcher, raised MSTR’s price target to $650, citing confidence that Strategy “will continue to aggressively raise capital to fuel its bitcoin acquisition strategy during the balance of the year,” according to a research note shared with CryptoMoon.
Debt-fueled Bitcoin buys
Since 2020, Strategy has spent upward of $33 billion buying BTC at an average cost of around $66,000 per coin, earning an unrealized profit of more than $10 billion, according to data from MSTR Tracker. 💰
It financed the buys with a blend of stock issuance and around $9.5 billion in convertible debt. Virtually none of Strategy’s debt matures until 2027 or later. 📅
This significantly reduces the risk of a short-lived BTC price drawdown, forcing Strategy to liquidate Bitcoin holdings, The Kobeissi Letter said. 🤞
“For this to happen, Bitcoin would need to fall well over 50% from current levels and remain there” until 2027 and beyond, they said. 😱
Stock price outlook
On the 25th of February, Bitcoin fell below the $90,000 mark for the first time since November 2024 amid ongoing sell-offs in US spot Bitcoin exchange-traded funds (ETFs).
The same day, shares of Strategy fell by more than 10% to approximately $245, according to data from Google Finance. 📉
The stock is down nearly 50% from all-time highs of $473 in November, shortly after Strategy unveiled its ambitious goal of buying $42 billion worth of Bitcoin by 2027.
Other companies following similar Bitcoin treasury strategies saw comparable retraces. Semler Scientific, which started buying BTC in 2024, is down more than 20% in the year-to-date, Google Finance data showed.
However, Benchmark believes in Strategy’s ability to keep generating “Bitcoin yield,” which measures the ratio of BTC holdings to outstanding shares. 📈
It effectively sets BTC-per-share as a lodestar for Strategy’s financial performance. Strategy is targeting a Bitcoin yield of 15% for 2025. 🎯
Read More
- Doctor Strange’s Shocking Return in Marvel’s Avengers: Doomsday Revealed!
- USD MXN PREDICTION
- OM PREDICTION. OM cryptocurrency
- EUR JPY PREDICTION
- DF PREDICTION. DF cryptocurrency
- COW PREDICTION. COW cryptocurrency
- FIL PREDICTION. FIL cryptocurrency
- YFI PREDICTION. YFI cryptocurrency
- KSM PREDICTION. KSM cryptocurrency
- XDC PREDICTION. XDC cryptocurrency
2025-02-25 23:41