Strategy's Bitcoin Bet Plunges 50% Amid Tariff Fears

Leveraged ETFs tied to Strategy, a major corporate Bitcoin holder, have plummeted by nearly 50% in the past five days, as the broader market took a hit following Donald Trump's confirmation of new tariffs. The firm's stock has also declined by roughly 16% year-to-date, mirroring Bitcoin's ongoing correction.

Strategy, formerly known as MicroStrategy, currently holds approximately 499,096 BTC, valued at $43.7 billion. However, with an average acquisition cost of $66,350 per Bitcoin, the company now faces mounting pressure as BTC struggles to regain momentum. The latest downturn has raised questions about the resilience of institutional Bitcoin investments and whether Strategy's aggressive accumulation strategy will pay off in the long run.

The sharp downturn has sent shockwaves through leveraged ETFs tied to Strategy. Both MSTX and MTSU plunged nearly 50% over the past five days. These ETFs, which traded above $43 and $9 per share last week, respectively, saw significant declines as trading volumes surged. At the time of writing, MSTX had dropped to $23.83 per share, while MTSU fell to $4.94.

Leveraged ETFs, designed to amplify returns through derivatives and borrowed capital, present higher profit potential but also come with increased risk, especially during market turbulence. Geoffrey Kendrick, Standard Chartered's Global Head of Digital Assets Research, noted that the current downturn aligns with a broader risk-off sentiment across traditional financial markets, increasing volatility in the crypto market.

Since 2020, Strategy has aggressively accumulated Bitcoin, spending over $33 billion to acquire BTC at an average cost of approximately $66,000 per coin. This strategic investment has resulted in an unrealized profit exceeding $10 billion. The company has primarily funded these purchases through a combination of stock issuance and $9.5 billion in convertible debt, with nearly all obligations maturing in 2027 or later. This long-term debt structure significantly mitigates the risk of a forced Bitcoin liquidation during short-term price dips, providing Strategy with a strong financial cushion amid market volatility.

As the market shows signs of recovery, Strategy's stock price may also rebound in the coming days.