For the first time, it is stated that they may "sell coins"; the leader of BTC concept stocks, MSTR, experienced a big dump during trading.

Longyue, Wall Street Journal

As the publicly traded company holding the most Bitcoin globally, MicroStrategy announced on Monday, December 1, that it has raised funds through the sale of stocks to establish a “dollar reserve” valued at $1.44 billion.

This move aims to address the volatility of the cryptocurrency market and provide security for the payment of its dividends and debt interest. Previously, the price of Bitcoin had fallen from a high of over $126,000 in early October to around $85,000 within a month.

The company's executives stated that if its indicator “mNAV”, which measures the relationship between enterprise value and cryptocurrency holdings, falls below 1, and the company cannot finance through other means, it will sell Bitcoin to replenish its USD reserves. This statement is seen as a significant turning point in the company's strategy, breaking the long-advocated philosophy of its founder, Michael Saylor, of “buying and holding forever.”

The company's stock price plummeted by as much as 12.2% during intraday trading on Monday after it hinted at the possibility of selling Bitcoin for the first time, ultimately closing down 3.3%. The sell-off by investors reflects deep concerns about the sustainability of its business model during the “Bitcoin winter.”

Dollar Reserves: Insurance Against the “Bitcoin Winter”

In the face of headwinds in the cryptocurrency market, MicroStrategy is taking steps to strengthen its financial position. According to media reports including the Financial Times, this $1.44 billion reserve is funded by the proceeds from the company's stock sales. The company's goal is to maintain a dollar reserve sufficient to pay “at least 12 months of dividends,” and ultimately expand to a scale that can cover “24 months or longer.”

According to reports, the funds were raised through the issuance of 8.2 million shares last week, enough to cover the company's total interest expenses for the next 21 months. Currently, MicroStrategy's annual interest and preferred stock dividend expenses are approximately $800 million. This move aims to ensure that the company does not have to be forced to sell Bitcoin in the short term, even if the capital markets lose interest in its stocks and bonds.

The company's CEO Phong Le candidly stated in a recent podcast episode “What Bitcoin Did” that this move is to prepare for the “Bitcoin winter”. Meanwhile, the company's founder Michael Saylor indicated that the reserve funds will “help us better navigate short-term market fluctuations.”

The Myth of “Never Selling” Shattered?

The most core change in this strategic adjustment is that MicroStrategy has for the first time acknowledged the possibility of selling Bitcoin. This potential selling condition is linked to the company's self-created “mNAV” metric, which is used to compare the company's enterprise value (market capitalization plus debt minus cash) with the value of its cryptocurrency assets.

CEO Phong Le clearly stated: “I hope our mNAV will not be below 1. But if we really reach that point and there are no other financing channels, we will sell Bitcoin.”

This statement is highly significant. For a long time, Michael Saylor has presented himself as a steadfast evangelist for Bitcoin, transforming MicroStrategy from a small software company into the largest corporate holder of Bitcoin in the world, with his core strategy being to continuously buy and hold for the long term.

Currently, the company holds approximately 650,000 bitcoins, valued at about $56 billion, accounting for 3.1% of the total global bitcoin supply. Its enterprise value is approximately $67 billion. Once the mNAV falls below 1, it means that the company's market valuation (after excluding debt) is lower than the value of the bitcoins it holds, which will severely undermine the foundation of its business model.

Urgent Debt Pressure

Behind the establishment of the US dollar reserve is the enormous debt pressure faced by MicroStrategy. The company has financed its Bitcoin purchases through various means including issuing stocks, convertible bonds, and preferred shares, and currently carries $8.2 billion worth of convertible bonds.

If the company's stock price continues to be sluggish, the holders of these bonds will choose to demand cash repayment of the principal from the company rather than converting it into shares, which will put significant cash flow pressure on the company. The rating agency S&P Global specifically pointed out the “liquidity risk” posed by its convertible bonds when it assigned MicroStrategy a credit rating of “B-” on October 27.

S&P warned: “We believe there is a risk that when Bitcoin prices are under severe pressure, the company’s convertible bonds may simultaneously mature, which could lead the company to liquidate its Bitcoin during a price slump, or engage in a debt restructuring that we might view as a default.”

The specific pressure is imminent. Data shows that holders of a $1.01 billion bond can demand the company repay the principal on September 15, 2027. In addition, there are more than $5.6 billion of “out-of-the-money” convertible bonds that may need to be redeemed in cash in 2028, posing potential risks to the company's long-term financial stability.

Trader Interpretation: Cautious Hedging or “Prelude to a Sell-Off”?

Although the remarks from MicroStrategy's CEO emphasized that Bitcoin would only be sold under extreme conditions, traders have clearly begun to “overinterpret” in the sensitive market environment.

Despite the company's insistence that its long-term accumulation strategy remains unchanged, traders are concerned that the latest comments introduce a potential path for sell-offs. This concern quickly translated into action, leading to a rise in risk aversion.

The market's reaction was polarized to CEO Phong Le's statement that “selling Bitcoin is mathematically reasonable when the stock price is below the value of the underlying asset and financing is limited.”

Pessimists read between the lines: Many cryptocurrency traders speculate that these seemingly understated comments could be a signal that the world's largest corporate holder is preparing to sell some of its Bitcoin. One user sarcastically commented on social media platform X, “Can't wait to see them sell at the bottom.” Another commenter noted, “Sounds like typical corporate PR talk, but they better not sell at the wrong time.”

Rationalists believe this is an inevitable move: there are also viewpoints that the company's CEO Phong Le simply candidly acknowledged the constraints that any publicly listed company faces when its market value is lower than its asset value. An investor pointed out: “The focus is not on whether they might sell, but on how strong their commitment is before that option becomes a reality.”

To calm the market, MicroStrategy subsequently stated on platform X that even if the price of Bitcoin falls back to the average purchase price of around $74,000, its held assets can still cover the outstanding convertible debt several times over; it even claimed that even if it drops to $25,000, its asset coverage ratio will still be more than double that of its liabilities. Founder Michael Saylor also continued to show confidence, announcing on Monday that the company purchased another 130 BTC for $11.7 million.

Market Reaction and Performance Warning

MicroStrategy's latest developments and the concerns over its strategic shift have quickly triggered a negative reaction in the market. On Monday, its stock price hit a low of $156 during intraday trading, and although it rebounded by the close, it still fell 64% from its 52-week high in mid-July. The stock has now accumulated a nearly 41% decline this year. Meanwhile, Bitcoin's price also suffered, falling over 4% to around $86370.

In addition to the company's own strategic adjustments, the drastic fluctuations in the macro market have also become the “last straw” that crushed the stock price. On Monday, the market showed a clear risk-averse tone, partly due to the yen financing squeeze triggered by the Bank of Japan's hawkish stance, and partly due to the turbulence within the cryptocurrency sector.

The relevant charts show the current market's extreme sentiment:

• Bitcoin purchasing power has shrunk: A year ago, one Bitcoin could purchase 3,500 ounces of silver; today, the same unit of Bitcoin can only purchase 1,450 ounces of silver, marking the lowest point since October 2023. This sharp drop in ratio visually reflects the weakness of crypto assets compared to traditional safe-haven assets like silver.

• The Sniping of the Options Market: SpotGamma's data indicates that MicroStrategy (MSTR) is facing a typical situation of “over-leveraged targets being attacked.” A large number of put options (Long Puts) are concentrated below $170. This negative gamma effect means that if the price of Bitcoin continues to fall, the hedging actions of market makers may accelerate the decline of MSTR, Coinbase, and other crypto-related stocks, potentially dragging down major stock indices.

• Macroeconomic headwinds: With rising expectations for interest rate hikes by the Bank of Japan, carry trades are facing liquidation pressure, and as the most speculative asset class, cryptocurrencies are the first to be impacted. Bitcoin temporarily sought support around $84,000 during the day, experiencing its worst single-day performance since March 3; Ethereum even fell below the $3,000 mark.

In addition to the pressure on stock prices, the company's performance expectations have also raised a red flag. MicroStrategy expects that if the price of Bitcoin ends this year between $85,000 and $110,000, the company's performance for the year could range from a net loss of $5.5 billion to a net profit of $6.3 billion. This sharply contrasts with the company's prediction of “achieving a net profit of $24 billion by 2025” released in its financial report on October 30.