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Features writer
Connor Sephton
Features writer
Connor Sephton
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Facts checked by
Elena Bozhkova
Features Lead
Elena Bozhkova
Bitcoin has long been a controversial topic on Wall Street. And as a small but vocal number of publicly listed companies race to hide as much as they can, it’s dividing traditional financiers more than ever.
Microstrategy (now known as Strategy) was ahead of the curve when it started adding BTC to its balance sheet in 2020. Its aggressive purchases were mainly financed by debt. With Bitcoin rallying close to 700% in five years, the company is now sitting on billions of dollars in unrealized profits.
Once a struggling and modestly successful business intelligence company, its birth as a Bitcoin cash company has proven very lucrative so far, and has had no shortage of copycats. While some see this as something to celebrate, it also creates deep cause for concern.
At the time of writing, The strategy contains more than 640,000 BTC – more than 3% of the total supply of this digital asset of 21 million. He paid an average price of $74,802 per coin, which means that the value of Bitcoin could fall by 30% and the company would still be in the black. That said, this average price has fallen dramatically of late. Back in August 2024, it was only $36,821.
Determining the strategy of continuing to buy BTC since it is near record highs means that their margins are continuously decreasing. As a result, when the next inevitable bear market arrives, the financial position of the company can deteriorate rapidly. Bitcoin is famous for painful peak-to-trough crashes of up to 80%. He would be executive chairman Michael Saylor be able to keep the lights on if history ends up repeating itself?
Such a scenario played out in 2022, after the spectacular collapse of FTX. BTC has contracted from $69,000 to $16,000 in 12 months. The strategy was able to persevere through this recession without unloading any of its holdings — despite racking up $4 billion in paper losses. But given that the company’s crypto stash has quadrupled since then, margin calls may be harder to ignore next time around.
Forced sales can have ramifications in many ways. For one, it could send Bitcoin into a death spiral, with panicked investors selling as they digest the news. A lack of liquidity compared to traditional markets means a big dump from Strategy could cause excessive drops in the value of BTC. And given that its stock often serves as a proxy for Bitcoin’s price, shares will also go down. To make matters worse, the company joined the tech-heavy Nasdaq 100 last December, meaning millions of savers who track this index through ETFs could see their portfolios take a hit. Everyday consumers with no interest in crypto could suffer indirectly if the company implodes.
The strategy is not alone here – indeed, many of its imitators are in a much less advantageous position. of Japan Metaplanetwhich was initially launched to provide hotel management, only began to acquire Bitcoin in April 2024. It paid an average of $106,000 per coin, leaving little breathing room if the bullish momentum of the crypto market is spent.
Despite BTC’s limited supply and high demand – through a mix of treasury companies and roaring trade in exchange traded funds that follow their spot price – critics argue that the value of Bitcoin has not grown in line with the huge jump in inflows to ETFs. Things can get messy if that doesn’t happen.
Saylor has positioned himself as a Bitcoin evangelist, someone on a mission to get as many businesses as possible to follow in the Strategy’s footsteps. Yet his years of campaigning don’t seem to have moved the needle that much, with large-cap stocks still preferring piles of cash to crypto.
The entrepreneur launched directly to Microsoft’s board of directors last December, and argued that diverting some of its vast dollar reserves “would add hundreds of dollars to the stock price.” But a staggering 99.45% of MSFT shareholders voted against the move.
the same month, Amazon has also faced calls to embrace BTC. A group of investors claimed that the e-commerce giant’s dollar reserves had been eroded due to inflation, meaning that billions of shareholder value was not protected. The National Center for Public Policy Research also claimed that the fifth largest company in the world may have a “fiduciary duty” to start holding Bitcoin in reserve.
There are two radically different ways of looking at fiduciary duty when it comes to Bitcoin. Critics insist that it is incredibly imprudent to expose shareholders to an erratic and immature asset that has nothing to do with the company’s main industry. However, the proponents have to fight back saying that it is more irresponsible to neglect a commodity that has appreciated by 77% in just 12 months, far surpassing gold, bonds, money and the S&P 500.
Whatever happens, one side is going to have egg on its face at some point in the not too distant future. And if Strategy’s “infinite money glitch” is on the wrong side of this argument, the contagion could spread far beyond the crypto market.
