In recent developments, Strategy (previously known as MicroStrategy) has gained considerable attention amid fluctuations in Bitcoin prices, notably hitting the $84,000 mark. This volatility is pushing the company closer to its average acquisition cost of $74,443 for Bitcoin, triggering discussions about the sustainability of its significant 649,870 BTC assets. Such circumstances have compelled the firm to assert its strategic approach while defending against critiques from industry voices like economist Peter Schiff.
Is Strategy’s Bitcoin Investment at Risk?
Recently, economist Peter Schiff has raised concerns regarding Strategy’s Bitcoin strategy as the value of the cryptocurrency fell dramatically. Schiff’s comments followed scrutiny of Michael Saylor’s approach in leveraging MSTR shares to enhance Bitcoin holdings.
In a post on X, Schiff criticized the foundation of the company’s operations, specifically its practice of selling preferred stocks to acquire more Bitcoin. He argued that this model relies on institutional investors buying these shares while the company builds its Bitcoin portfolio.
Nevertheless, Schiff expressed skepticism about the company’s ability to deliver the promised returns. He warned that should fund managers lose faith in the company’s yield promises, it could initiate a mass sell-off of MSTR shares, potentially resulting in a downward spiral.
In response to bankruptcy speculation, the company recently emphasized its strong financial position, stating that it enjoys a remarkably long runway. They asserted that “with current Bitcoin valuations, we boast 71 years of dividend coverage if prices stabilize.” The management also claimed that a mere 1.41% increase in Bitcoin prices would suffice to meet their dividend commitments.
Despite these reassurances, Schiff has continued to challenge the sustainability of the company’s strategy. In another post, he highlighted concerns over Strategy’s assertion that even a sharp 90% decline in Bitcoin price would have minimal consequences for the firm. Schiff suggested that it would be hard for investors to sit idly by as their investments plummet.
Schiff also pointed out that if Bitcoin were to fall by 90%, the valuation of MSTR stocks would likely be reduced substantially in comparison to their Bitcoin assets, exacerbating investor losses.
Presently, with Bitcoin values above the $80,000 threshold, Strategy’s holdings remain profitable. According to recent metrics from Bitcoin Treasuries, the firm’s holdings still reflect a strong 16% increase, yielding over $5 billion in profits to date.
