- Strategy's MSTR has declined over 55% since November 20, igniting concerns of forced liquidations among investors.
- The sell-off stems from the company's heavy exposure to Bitcoin following its buying spree in the past year.
- Strategy could be forced to liquidate part of its Bitcoin holdings if investors redeem convertible notes early.
Strategy (formerly MicroStrategy) witnessed an 11% stock decline on Tuesday, stirred by Bitcoin's market's plunge below $90,000 and fueling speculations of a forced liquidation for the company.
Strategy stock decline sparks fears of Bitcoin holdings liquidation
Strategy's MSTR stock fell 11% in the past 24 hours as Bitcoin and the crypto market experienced harsh declines.
The business intelligence firm's stock has been on a steady decline since reaching a peak in November, dropping by 55% from its peak, according to The Kobeissi Letter.
The decline follows an earlier rally spurred by Donald Trump's presidential election victory, which stirred a massive push for crypto assets like Bitcoin, which the company has aggressively bought since September.
Strategy holds a total of 499,096 BTC worth $43.7 billion, but with Bitcoin's price dropping below $90,000, investors are now speculating that the company may sell off some of its Bitcoin holdings.
Strategy has continued acquiring Bitcoin since 2020 at an average cost of $66,350 per BTC.
However, the possibility of the company selling off its Bitcoin holdings is "highly unlikely," said The Kobeissi Letter.
From a technical viewpoint, forced liquidation of $MSTR is not necessarily impossible.
— The Kobeissi Letter (@KobeissiLetter) February 25, 2025
But, it is highly unlikely.
This is particularly due to the way the convertible notes are structured and multiple price variables at play.
It would need a "mayday" situation to occur.
This is largely due to the structure of the company's convertible notes— which are a major source of its capital.
Strategy generates capital by issuing 0% convertible notes to investors, which it, in turn, uses to purchase Bitcoin.
Notably, most of the firm's convertible notes do not mature until 2028. This makes it difficult for the company to liquidate its Bitcoin holdings.
To consider liquidating holdings, BTC's price would have to "fall well over 50% from current levels and remain there," The Kobeissi Letter added.
Likewise, Strategy could be forced to liquidate part of its Bitcoin holdings if investors redeem convertible notes early.
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