Strategy (formerly MicroStrategy) has been in the headlines recently after the price of Bitcoin crashed into the $84,000 area. The market crash put the company dangerously close to its average purchase price of $74,443, leaving the company only 30% of the massive 649,870 BTC it holds out of the red. This led the company to publicly defend its position and strategy amid calls from people like economist Peter Schiff.
Having trouble with Strategy’s Bitcoin Stash?
Last week, economist Peter Schiff called on the strategy team for the first time and questioned the viability of the Bitcoin strategy at a time when the price of the digital asset is plummeting. This comes amid claims that Michael Saylor’s strategy to issue MSTR shares to buy Bitcoin has already failed.
In his X post, Schiff mentioned the company’s entire business model of issuing preferred stock and using the proceeds to actually buy more Bitcoin. According to the analyst, the company’s entire business model was actually based on the fact that preferred shares issued while the company was accumulating Bitcoin were purchased by income-oriented funds.
But Schiff said the company would not actually be able to pay the disclosed rate of return. In this case, once fund managers realize that the quoted returns will never be met, they have no choice but to start selling MSTR shares, triggering a ‘death spiral’.
At the time, the company responded to rumors of a possible bankruptcy by explaining that the company had a very long runway. According to a post on The post also explained that only the 1.41% rise in the price of Bitcoin actually covers the company’s dividend obligation.
Nonetheless, Schiff did not give up on the company, with another post addressing Strategy’s claim that a 90% collapse in Bitcoin would not affect the company. The economist explains that even if this were true, it is unlikely that Strategy’s investors would actually be OK with losing 90% of their investment.
If the price of Bitcoin plummets 90%, Peter Schiff explains, MSTR stock will likely trade at a huge discount to its BTC holdings. In this case, the investor’s losses may accelerate.
For BTC, the price is still trending above $80,000 and the strategy stash is still generating solid profits. According to data from the Bitcoin Treasuries website, the company is still maintaining a 16% gain, with current profits on its holdings reaching over $5 billion at the time of this writing.
Featured image by Dall.E, chart by TradingView.com
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