MicroStrategy’s stock drops 66%, wiping $90B from its market cap, despite holding $59B in Bitcoin and stable liquidity.
MicroStrategy’s stock has taken a massive hit, dropping 66% over the last six months. As a result, nearly $90 billion has been wiped from the company’s market cap.
This sharp decline comes as Bitcoin’s price has fallen significantly, and concerns have arisen around the company’s future.
Despite these challenges, MicroStrategy’s Bitcoin holdings are still worth more than its current market cap, raising important questions about the long-term viability of its strategy.
Bitcoin Price Decline and Market Impact
The price of Bitcoin has fallen from $126,000 to around $87,000 in the past six months. This significant drop has had a direct impact on MicroStrategy market value.
The company holds over 672,000 BTC, valued at around $58.7 billion. While this decline affects the value of MicroStrategy’s Bitcoin, its liabilities are still well below this amount.
Even if Bitcoin were to fall to $74,000, MicroStrategy’s Bitcoin stack would still be worth more than its debt.
The company’s total debt is approximately $8.24 billion, far less than the value of its BTC holdings.
Unlike a hedge fund, MicroStrategy does not use margin loans or collateral-backed debt. Therefore, a price drop in Bitcoin will not trigger any forced liquidation.
Liquidity and Debt Structure: No Need for Forced Sales
MicroStrategy has taken steps to ensure it remains liquid even if Bitcoin’s price continues to fall.
The company has set aside $2.188 billion in reserves, which is enough to cover two and a half years of expenses.
Additionally, the company’s software business continues to generate significant revenue, reducing the need to sell Bitcoin in the near term.
MicroStrategy also does not face any major debt maturities until 2028.
This gives the company plenty of time to adapt to changes in the market without needing to sell its Bitcoin.
The company’s debt structure, based on unsecured convertible notes, means that it is not at risk of being forced to liquidate assets in response to price declines.
Related Reading: MicroStrategy Adds $835M in Bitcoin Amid Market Dip
External Factors Contributing to MSTR’s Decline
Several external factors have also played a role in the recent decline of MicroStrategy’s stock.
In October, MSCI proposed new rules that could remove companies holding large amounts of Bitcoin from its indexes.
This raised concerns about forced index selling, though no final decision has been made.
Additionally, JPMorgan increased margin requirements for trading MSTR, which led some investors to reduce their positions.
The introduction of Bitcoin-linked products by other major banks, such as Morgan Stanley and JP Morgan, has also impacted investor interest.
These new products have shifted capital away from MicroStrategy, further adding to the downward pressure on the stock.
Bearish reports, including those from JP Morgan, have only amplified these fears, creating a cycle of negative sentiment.
The post MSTR Meltdown: Saylor’s Bitcoin Bet Erases $90B as Shares Crash 66% appeared first on Live Bitcoin News.
Source: https://www.livebitcoinnews.com/mstr-meltdown-saylors-bitcoin-bet-erases-90b-as-shares-crash-66/
