Strategy Loses Billions on Massive Bitcoin Hoard

Strategy alchemist-in-chief Michael Saylor posted four letters to X yesterday as the bitcoin holding company’s stock plummeted alongside the digital asset it has stockpiled: “HODL,” meaning “Hold On for Dear Life.” 

Shares in the company, formerly called MicroStrategy, suffered double-digit declines yesterday as bitcoin, which it owns more than 713,000 of, dipped below $64,000. After the bell, Strategy shared a net loss of more than $12 billion.

Now, the company’s core business is being tested.

In/Finite Money Glitch

Though Strategy sells a small amount of software ($123 million in revenue last quarter), it’s essentially a bitcoin holding company that investors buy stock in to gain indirect exposure to the digital asset. For Strategy, that has historically meant buying bitcoin, selling stock for more than the price of bitcoin, and pocketing the difference. Lather, rinse, repeat. 

From 2020 to 2024, Strategy’s shares surged by more than 3,500% as its stock attracted investors who didn’t want to deal directly with the blockchain. But as the price of bitcoin falls, Strategy’s margins are looking tight:

• Strategy has regularly bought bitcoin through both its price peaks and valleys, scooping up the coins for an average of $76,000 each. It bought another 855 tokens last week for nearly $88,000 apiece. This week, bitcoin fell below the average price Strategy has paid for it. 
• The company’s market-to-net asset value, or mNAV, fell to 1.09 late Thursday, meaning it barely trades at a premium to bitcoin. Investor Michael Burry (of “The Big Short” fame) wrote in a Substack post Monday that a 10% dip below $70,000 for bitcoin would put Strategy in the red. He pegged $60,000 as a threshold below which a “death spiral” could drag down the wider crypto sector. 

Fading Value Prop: Strategy’s value prop as insulation between investors and crypto made more sense before spot bitcoin ETFs came on the scene last year. BlackRock and Fidelity have since launched funds, giving investors a way to gain indirect bitcoin exposure through familiar financial institutions and vehicles. These funds aren’t immune to the crypto downturn, with investors pulling $545 million from US bitcoin ETFs Wednesday. But that’s pennies compared with the total managed assets of businesses like BlackRock. For his part, Saylor isn’t focused on a short-term chill, framing Strategy and its pile of bitcoin as a long-term investment that’ll bounce back.