Strategy (formerly MicroStrategy), led by Michael Saylor, the single largest bitcoin holder in the United States, is reeling from the twin pressures of falling bitcoin prices and huge debts. According to an 8-K filing with the SEC on April 7, Strategy stated that it may be forced to sell its bitcoin holdings if it is unable to cope with the current financial difficulties.
Strategy in Financial Distress
The current financing and coin purchasing model relies on the market’s long-term bullish expectations for Bitcoin. If the Bitcoin price falls into a long-term fluctuation or decline, the company will face dual pressures: it must pay existing debt interest and deal with the risk of equity dilution caused by stock issuance.
According to the disclosure in the 8-K filing, Strategy currently holds 528,185 Bitcoins, with a total value exceeding 40 billion USD, and an average acquisition cost of 67,458 USD/coin. Since its transformation into a “Bitcoin enterprise” in 2020, the company has continuously increased its holdings through financing methods, becoming a benchmark for cryptocurrency investment in the US stock market. However, as the price of Bitcoin has fallen from its peak of 100,000 USD at the end of 2024 to around 76,400 USD, coupled with a debt burden of 8.22 billion USD, Strategy’s financial situation is facing severe challenges.
The Bitcoin strategy of Strategy was once the engine behind its soaring stock price, but now it has become a Damocles sword hanging over its head. The SEC filings clearly state that Bitcoin accounts for the “vast majority” of the company’s balance sheet, and its price fluctuations directly determine the company’s financing capabilities and debt repayment prospects. Once certain key factors spiral out of control, selling Bitcoin may become a reality that must be faced.
The biggest risk comes from the continued decline in the price of Bitcoin. If the price falls below the cost price of $67,458 or even slides to the recent low of $74,500, the value of the company’s assets will shrink significantly. The document warns that if Bitcoin falls below its book value, Strategy may struggle to raise funds through the issuance of shares or bonds. Since Trump’s victory in November 2024, the company bought 275,965 bitcoins at an average price of $93,228 each, costing $25.73 billion, and now has a floating loss of $4.6 billion. To make matters worse, in the first quarter of 2025, Bitcoin’s unrealized losses amounted to $5.91 billion, adding to the risk.
At the same time, the cash flow crisis has put the company in a precarious position. The core business of Strategy - data analysis software, has failed to generate positive cash flow for several consecutive quarters. However, the company still has to pay $35.1 million in debt interest and $146 million in dividends each year, totaling $181.3 million. If external financing does not keep up, selling Bitcoin is almost the only way out. The document mentions that $8.22 billion in debt (as of the end of March 2025) poses a tremendous repayment pressure, and if the market environment deteriorates, the company may even be forced to sell at a “loss price” below cost.
Finally, market and security factors may become unexpected triggers. If a Bitcoin custodian (such as a bank or third-party custodian) goes bankrupt, or suffers a cyber attack resulting in asset loss, the Strategy may be forced to sell off the remaining Holdings to cover the losses. The document specifically mentions that its insurance only covers a small amount of Bitcoin, highlighting the reality of this risk.
Of course, the strategy is not to sit idly by. The company plans to alleviate pressure by issuing additional shares or new bonds, having previously spent 7.7 billion dollars in the first quarter of 2025 to increase its holdings of Bitcoin at an average price of 95,000 dollars per coin. However, entering April, as the market declined, this aggressive buying strategy has clearly slowed down. If financing channels are blocked, selling coins becomes the last resort.
What is the potential impact of selling pressure on the market?
The Bitcoin holdings of Strategy account for about 2.5% of the total Bitcoin supply. Once sold off, the market is likely to struggle to calm down. The scale of the sell-off depends on the company’s specific needs, and the impact will be layered accordingly.
If it is only to cope with short-term expenses, such as paying annual interest and dividends totaling 181.3 million dollars, it would require selling about 2,318 Bitcoins. This accounts for less than 0.5% of its total Holdings of 528,185, and the impact on the market is relatively limited, likely only causing slight fluctuations, and investors may not panic too much. However, if Strategy needs to repay part of its debt, such as 1 billion dollars, the scale of sales will expand to about 12,800 Bitcoins, accounting for 2.4% of Holdings. In an environment where the daily trading volume in the Bitcoin market is only 10-30 billion dollars and liquidity is low, such a sell-off could drive prices down by 5% to 10%, enough to put significant pressure on the market.
The more serious situation is that if Strategy must repay the entire $8.22 billion debt at once, the scale of the sell-off will surge to about 105,000 Bitcoins, which is equivalent to 20% of its Holdings. Such a large-scale sell-off would be nearly impossible to absorb in the current market and is likely to trigger a price flash crash, especially considering the sensitivity of the Bitcoin market to large transactions—recently, the flash crash from $83,000 to $74,500 has fully demonstrated this.
The most extreme scenario is the company’s bankruptcy or forced liquidation, which could mean the sale of all 528,185 Bitcoins, worth over 40 billion USD. This would be a devastating blow to the market, potentially leading to a halving of Bitcoin prices, or even worse. However, the likelihood of such a full-scale sell-off is low, unless the company faces a systemic crisis, such as a debt default compounded by regulatory forced liquidation. In either scenario, Strategy’s actions could become a significant turning point in the Bitcoin market, warranting close attention.
Another aspect of market impact is the chain reaction. If Strategy sells off, other institutions or retail investors may follow suit, leading to a vicious cycle in Bitcoin prices. The tariff policy after Trump’s inauguration has exacerbated the selling sentiment for risky assets, and Strategy’s actions may become the “last straw” that breaks the market.
What has sparked even more discussion is that this matter also involves Michael Saylor’s credibility. As a staunch supporter of Bitcoin, Michael Saylor has repeatedly claimed on media platforms like CNBC that he would “never sell his coins,” and even stated that he would bequeath his Bitcoins to organizations that support this asset after his passing. However, the wording in the SEC documents: “may sell Bitcoin at a price lower than the cost” seems to break this promise.
Will they really sell Bitcoin?
The Bitcoin strategy of Strategy began in 2020 when Saylor positioned it as “digital gold” to combat inflation. By issuing convertible bonds, preferred stocks, and ATM increases, the company has cumulatively invested $35.6 billion in purchasing Bitcoin, with Holdings at one point reaching several billion dollars in unrealized gains. However, the recent fall in Bitcoin prices combined with debt pressure has led the company to report losses for three consecutive quarters.
In fact, the sell-off risk mentioned in this SEC filing is not the first time it has been raised. Strategy submitted a total of 25 8-K filings this year, with those labeled “Operating Results and Financial Condition” generally submitted at the beginning of each month. The monthly “Operating Results and Financial Condition” report is a routine operation. As early as the 8-K filing on January 6, there was a mention of the risk warning regarding the “potential sale of Bitcoin”; however, the filings in February and March did not mention this, making this the first time in three months that this risk warning has been referenced again in the 8-K form. However, the straightforward wording in this 8-K filing, “may sell at unfavorable prices,” to some extent reflects the intensification of current pressures, which may be directly related to the recent significant fall in Bitcoin and the $5.91 billion in unrealized losses.
Looking back at the last bear market, Strategy also faced severe challenges, with net assets being negative, yet it was not forced to sell its Bitcoin. This was mainly due to two key factors: first, the debt maturity date is far off (the earliest being 2028), and second, founder Michael Saylor holds 48% of the voting rights, making it difficult for a liquidation proposal to pass. Therefore, even if Bitcoin falls below the cost price, the likelihood of triggering a sell-off “death spiral” is relatively low. Compared to the last bear market, today’s Strategy has various coping tools: issuing bonds, increasing stock issuance, or using the $40 billion Bitcoin holdings as collateral for financing.
In addition, from a macro trend perspective, Bitcoin is gaining recognition from an increasing number of sovereign funds and institutions, with a positive long-term outlook. Although short-term price fluctuations may bring financial pressure, the Strategy has a longer debt maturity, and with an improving market environment, the actual risk of sell-off is limited.
Related Reading: “Michael J. Saylor’s Strategic Bet: The Premium Issuance of Bitcoin and Capital Manipulation”
In the short term, the market will closely monitor its quarterly report and subsequent financing plans. As for whether it will sell off, the market will hold its breath. The next steps for this company not only concern its own survival but may also affect the future landscape of Bitcoin.
