Bitget App
Trade smarter
Buy cryptoMarketsTradeFuturesEarnWeb3SquareMore
Trade
Spot
Buy and sell crypto with ease
Margin
Amplify your capital and maximize fund efficiency
Onchain
Going Onchain, without going Onchain!
Convert
Zero fees, no slippage
Explore
Launchhub
Gain the edge early and start winning
Copy
Copy elite trader with one click
Bots
Simple, fast, and reliable AI trading bot
Trade
USDT-M Futures
Futures settled in USDT
USDC-M Futures
Futures settled in USDC
Coin-M Futures
Futures settled in cryptocurrencies
Explore
Futures guide
A beginner-to-advanced journey in futures trading
Futures promotions
Generous rewards await
Overview
A variety of products to grow your assets
Simple Earn
Deposit and withdraw anytime to earn flexible returns with zero risk
On-chain Earn
Earn profits daily without risking principal
Structured Earn
Robust financial innovation to navigate market swings
VIP and Wealth Management
Premium services for smart wealth management
Loans
Flexible borrowing with high fund security
MicroStrategy’s Billion-Dollar Bitcoin Bet: Is a Forced Sale Inevitable?

MicroStrategy’s Billion-Dollar Bitcoin Bet: Is a Forced Sale Inevitable?

CryptodnesCryptodnes2024/11/19 13:22
By:Cryptodnes

BitMEX Research warns that MicroStrategy’s strategy of issuing bonds to fund Bitcoin purchases carries significant risks.

The firm has accumulated a substantial Bitcoin reserve by issuing debt, a tactic that may expose it to potential financial strain.

While BitMEX suggests a forced liquidation of the company’s Bitcoin holdings is unlikely, it acknowledges the high volatility of Bitcoin and the risks associated with its price fluctuations. MicroStrategy currently has $4.25 billion in outstanding bonds, with two bonds already repaid. If Bitcoin’s value drops sharply, particularly during bond maturity periods, the company could face a scenario where its Bitcoin holdings are insufficient to cover its debt.

Although such a drastic decline in Bitcoin’s price to levels around $15,000 is unlikely to immediately force a sale of Bitcoin, analysts may need to reconsider if the company cannot raise additional funds or if the situation worsens. Given the maturity dates for the bonds extend from 2027 to 2031, a forced liquidation remains improbable, but a significant drop in Bitcoin’s value could create pressure.

READ MORE:
BREAKING: MicroStrategy Buys $4.6 Billion in Bitcoin

More realistically, BitMEX predicts that if MicroStrategy’s stock premium evaporates, shareholders may push the company to sell Bitcoin to meet bond obligations. This situation could arise if the stock moves from a premium to a discount, a shift that may trigger the sale of its Bitcoin holdings to maintain liquidity. While the company can currently avoid such action due to the stock’s high premium, that “infinite money glitch” won’t last indefinitely.

0

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

PoolX: Earn new token airdrops
Lock your assets and earn 10%+ APR
Lock now!