Michael Saylor, one of bitcoin’s most vocal advocates, has suggested his company Strategy might sell some of its 650,000 bitcoin holdings, marking a dramatic reversal for the executive who built a business model entirely around accumulating the cryptocurrency.
The Premium That Made It All Work
Strategy’s business model depends on a critical factor: its stock trading at a premium to the value of bitcoin it holds. This premium has now collapsed to a five-year low, threatening the financial engine that transformed a struggling software company into a bitcoin accumulation machine.
The company’s enterprise value currently stands at just 1.16 times its bitcoin holdings, down from twice that level in June. Strategy’s shares have plummeted nearly 60 percent from their $127 billion peak valuation in July.
David Krause, emeritus associate professor of finance at Marquette University, warned that if the premium disappears entirely, Strategy’s “entire business model breaks.”
“It’s like a flywheel that only works when investors are willing to pay more than the bitcoin is worth,” Krause wrote in a recent analysis. “When the premium disappears, that flywheel reverses.”
How the Model Worked
Strategy’s approach was straightforward but dependent on sustained investor enthusiasm. As long as the company’s stock traded above the value of its bitcoin holdings, it could sell shares, convertible bonds and other equity instruments to buy more bitcoin.
Each share issued would increase the amount of bitcoin per share owned by existing shareholders, a metric Saylor created to measure the company’s success. This virtuous cycle propelled Strategy’s stock price up 1,200 percent since its first bitcoin purchase in 2020.
The company sold tens of billions of dollars worth of securities to fund its relentless bitcoin acquisition, becoming the largest corporate holder of the cryptocurrency with approximately 650,000 tokens.
The Unthinkable: Selling Bitcoin
Two weeks before floating the possibility of bitcoin sales, Saylor posted an AI-generated image of himself fleeing a sinking ship, a striking departure from his typically bullish messaging.
However, if the company traded at a discount to its bitcoin holdings, Saylor added that “yes, we could sell the bitcoin.”
Strategy has warned it could face a $5.5 billion net loss if bitcoin ends the year at $85,000, far below the company’s earlier forecast of $150,000. The cryptocurrency has fallen approximately 30 percent from its October peak.
The company recently announced it would launch a $1.4 billion US dollar reserve to cover dividend and debt payments for 19 months, representing another significant policy shift for a business built on the premise that bitcoin is the only currency worth holding.
“It’s pure comedy,” said one US hedge fund chief investment officer who bet against Strategy earlier this year.
Different Reactions from Investors and Shareholders
Investors who wagered on Strategy’s premium eventually disappearing have profited handsomely. The trade involved going long bitcoin while shorting Strategy’s shares, betting the gap would narrow.
New York-based Kerrisdale Capital was among the first to enter this position, criticizing Strategy’s capital appetite and what it called the company’s “bloated” valuation in March 2024. Jim Chanos, one of Wall Street’s most prominent short sellers, closed his short-Strategy, long-bitcoin trade after 11 months in November.
Strategy’s model inspired numerous imitators, with other public companies adopting similar bitcoin treasury strategies. The current sell-off is now exposing the financial vulnerability of this approach.
The collapse of Strategy’s premium demonstrates the risks of building a business model dependent on sustained asset price appreciation and investor enthusiasm. When market sentiment shifts, companies relying on premium valuations to fund operations face severe constraints.
Saylor’s supporters have dismissed suggestions that his recent moves represent defeat. Ed Juline, Strategy’s former director of bitcoin advocacy, defended the executive’s approach.
“Is this what he wanted to do? Absolutely not. But [the announcements] are still steps and bridges and tools to get to the end goal: to accumulate more and more bitcoin,” Juline said. “Saylor’s a genius and 100 percent committed to what he’s doing.”
What This Means for Bitcoin Markets
The potential for Strategy to sell a portion of its massive bitcoin holdings introduces a new source of uncertainty for cryptocurrency markets. With 650,000 bitcoins valued at approximately $55 billion at current prices, any significant liquidation could impact market dynamics.
More broadly, Strategy’s predicament illustrates the challenges facing corporate bitcoin treasury strategies during extended price declines. The model works exceptionally well during bull markets but becomes increasingly difficult to sustain when cryptocurrency prices fall and investor enthusiasm wanes.
For the crypto industry, watching one of bitcoin’s most prominent advocates acknowledge he might need to sell holdings represents a sobering moment. It underscores that even the most committed believers face financial realities when business models dependent on perpetual price appreciation confront market downturns.
Strategy has not responded to requests for comment on its future plans regarding bitcoin holdings or capital raising strategies.
