MicroStrategy’s Massive $3.4 Billion Bitcoin Bet May Threaten Its Financial Stability
Since MicroStrategy’s move to Bitcoin, the business has amassed 130,000 Bitcoins, which are worth around $3.406 billion at current exchange rates.
Michael Saylor, a Bitcoin maximalist, tweeted earlier today, “Bitcoin is the pulse of Earth.” Michael Saylor is well-known in the cryptocurrency field and is often seen advocating for Bitcoin and promoting its benefits. But the actual evidence of Saylor’s faith in the flagship cryptocurrency can be seen in the financial statements of MicroStrategy, the software firm he co-founded.
According to a report by Forbes, Michael Saylor may have compromised the company’s stability by placing a large bet on Bitcoin.
Saylor, the company’s CEO at the time, chose to invest in Bitcoin as a hedge against inflation in August 2020. Since then, he has not looked back.
Under the leadership of Michael Saylor, MicroStrategy collected more than 129 thousand Bitcoins. This purchase was funded through four $2.4 billion debt transactions, three bond offers, one margin loan, and a $1 billion equity offering.
Saylor stated in August that he would be stepping down as CEO. Nonetheless, Bitcoin accumulation continued. The most recent acquisition of Bitcoins for $6 million raised the company’s total Bitcoin holdings to 130,000 BTC, with a current market value of $3.406 billion.
What then has transpired since then? On October 13, Bitcoin fell to $18,300, its lowest level in over two years. This is where MicroStrategy began to feel some discomfort. Due to the company’s debt commitments, Bitcoin’s price must remain above $18,500 (their average BTC price) to justify the company’s holdings against its $2.4 billion debt.
The decline in Bitcoin’s price resulted in a flat $26 million loss on his investment. In addition, such a decrease in BTC’s price makes meaningless the company’s $1 billion stock offering.
In 17 months, MicroStrategy will have to begin repaying its loan. In December 2025, the company will be required to repay $885 million of its debt, with the balance due by early 2027.
Given that Saylor has significantly leveraged its Bitcoin assets, the firm’s financial stability is highly dependent on Bitcoin’s price rebound.