I came across a piece the other day that talks about some of the trials Strategy could be facing as early as next year. I think many of us have seen the dangers to investing in the company, and this just highlights them.
Read the piece here: https://protos.com/microstrategy-admits-it-might-need-to-sell-bitcoin-by-2026/
Just to sum it up, because I know few of you are going to read it:
According to a recent SEC filing, Saylor’s company is now acknowledging that it may be forced to sell some of its BTC as early as next year. This is a bit shocking, considering Saylor has long been the face of corporate Bitcoin maximalism, famously declaring that “you do not sell your Bitcoin” and vowing to hold his coins until death. But... maybe that will be changing soon.
The filing outlines several scenarios that could compel Strategy to liquidate part of its holdings:
- The company holds $8.2 billion in USD-denominated debt, and if Bitcoin’s price continues to decline, Strategy might lack sufficient cash to meet interest payments, necessitating BTC sales.
- Obligations to preferred shareholders, including 8% and 10% dividend-yielding series, could require BTC liquidation to fulfill these commitments.
- With Bitcoin down 19% year-to-date, the company’s profit margin on its BTC investment is under 15%, increasing financial pressure.
While Saylor’s public persona promotes unwavering confidence in Bitcoin, it’s essential to recognize that his primary role is to attract investors to his company. That is to say, his Bitcoin cheerleading serves a more self-interested purpose. This doesn't take away from his messaging. Many of us have probably watched interviews with him and agreed with everything he's said about Bitcoin, but we do need to honestly recognize that he does have an alterative reason for all his appearances promoting BTC.
Though it might be extreme to label Strategy’s approach as a Ponzi scheme, the reliance on continuous capital inflows to sustain operations bears just a little resemblance to one. You know the saying—if it looks like a duck and quacks like a duck… well, it might just be a duck.
For individual investors, purchasing Bitcoin directly offers a more straightforward and potentially safer exposure to the asset. Investing in MSTR introduces additional risks, including corporate debt obligations and the potential for forced BTC sales, which could leave regular investors high and dry.
This isn't to say that MSTR doesn’t come with its upsides. If we ever do enter a bull run then market exuberance could push MSTR up much faster than BTC and higher percentage-wise, allowing for greater gains. I kind of don't think the pros are worth it, but you may disagree.
Anyway, again full article here: MicroStrategy admits it might need to sell bitcoin by 2026
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David is an American teacher and translator lost in Japan, trying to capture the beauty of this country one photo at a time and searching for the perfect haiku. He blogs here and at laspina.org. Write him on Mastodon. |