Bitcoin News Today: Bitcoin's Plunge Exposes Strategy's Debt Risks as Saylor Stands Firm

Strategy's stock has plunged 68% from its record high of $543, mirroring Bitcoin's decline from $126,000 to as low as $81,000, marking one of its worst drawdowns since adopting a Bitcoin treasury strategy in 2020 according to CoinDesk. The company, now valued near its net asset value (NAV) rather than the premium it once commanded, faces mounting risks as its Bitcoin-heavy model falters amid broader market volatility. JPMorgan analysts warn that Strategy could be excluded from major equity benchmarks like MSCI USA and the Nasdaq 100, potentially triggering up to $9 billion in passive fund outflows.

The firm's business model-raising capital through equity and convertible debt to purchase Bitcoin-has become a double-edged sword. Over the past year, Strategy has diluted its common shares from 160 million to over 286 million, with institutional investors holding 48% of the stock. This dilution, combined with Bitcoin's underperformance, has eroded investor confidence. The company's market-to-NAV ratio has fallen to 1.1, indicating its stock now trades only marginally above the value of its Bitcoin holdings.

Bitcoin's recent 30% selloff, driven by a hawkish Federal Reserve and risk-averse market sentiment, has exposed cracks in Strategy's flywheel. The firm's preferred shares and convertible debt-once seen as safer bets-have also come under pressure. Its $3 billion convertible bond issue, yielding nearly 8%, now faces redemption risks in 2028. Meanwhile, analysts debate whether the company's discount to NAV signals systemic risk or simply reflects short-term volatility. Some warn that sustained underperformance could force Strategy to sell Bitcoin to meet debt obligations, though executives like Arca's Jeff Dorman argue such scenarios are unlikely.

Michael Saylor, Strategy's founder, remains bullish on Bitcoin despite the turmoil. He recently highlighted reduced crypto volatility (from 80% annualized in 2020 to 50% today) and insisted the company is "engineered to take an 80 to 90% drawdown and keep on ticking". However, critics question the sustainability of its debt-laden balance sheet. With $8.1 billion in liabilities, a sharp drop in Bitcoin prices could strain liquidity, particularly if the firm must raise additional capital.

The sector's future also hangs in the balance. MSCI's review of companies with digital assets exceeding 50% of total assets could redefine how Bitcoin treasuries are valued. If Strategy is excluded from indices, it could lose institutional support and face higher funding costs. For now, the company continues to buy Bitcoin, acquiring 8,178 BTC at $102,171 each in November, even as its stock remains a volatile barometer for crypto sentiment.