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For the first time in the company’s history, Strategy’s market capitalization has fallen below the net asset value of its Bitcoin reserves.
This reversal means that the total value of Bitcoin that you own is now less than the total debt that the company took to acquire it. Analysts warn that if bearish conditions persist, the Strategy could enter a death spiral.
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The burden of debt turns into a liability
Today saw a sharp drop in Bitcoin linked to increased pressure on Strategy (formerly known as MicroStrategy), the largest corporate holder of the currency.
Market sentiment has changed dramatically after… Bitcoin broke the $100,000 barrierIt was trading near $95,562 at the time of writing. The deterioration heightened concerns around Strategic’s credit position, adding further pressure to an already fragile market environment.
This shock also raised new questions about… The feasibility of the customization model That relies heavily on aggressive leverage. President Michael Saylor is using billions in borrowed capital to expand the company’s Bitcoin holdings, enlarging both the rewards and the risks.
As Bitcoin grows, that leverage fuels gains. But when it decreases, the debt becomes a weak point for the company.
This scenario has raised new fears among traders that the Strategy may throw it into what some call a “death spiral”. Declining BTC prices slowly dissipate the value of the company’s collateral.
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In this situation, the company may be forced to sell part of its possessions to meet its liabilities. Even if such a scenario never materializes, the mere possibility is enough to make market participants reposition themselves.
Saylor addresses sales speculation
In addition to the risk of Strategic’s structural leverage, market participants are also concerned about the impact that the market could suffer if Saylor exits some of its holdings.
The strategy currently owns 641,692 Bitcoinor about 3% of the total circulating supply. If the company is forced to liquidate a significant portion of this inventory, the resulting increase in supply could significantly impact the market.
These growing concerns have prompted Saylor to address speculation about a possible Bitcoin sale. In an interview with CNBC, the founder of the Strategy reiterated his long faith in Bitcoin and gave a pitch. The rumors about the sale.
Saylor stated that his opinion is that Bitcoin will be It beats goldAnd it’s going to outperform the S&P, it’s a digital capital, because if you’re a long-term investor, this is the place to be.
Despite his confidence, today’s developments inevitably raise concerns about structural weaknesses in the company’s consolidation strategy.
