"MSTR's Bitcoin Bet: Profitable Despite Plunge, Forced Sales Unlikely"

Bitcoin's recent price declines have been a hot topic in the news, but MicroStrategy (MSTR), a major corporate BTC holder, has been in a downtrend for over three months. Trading around the $250 level on Wednesday, MSTR is down about 55% from its peak of $543 on November 21. Investors in leveraged MSTR products have suffered even greater losses, with the Defiance Daily Target 2x Long MSTR ETF (MSTX) plunging 90% and the T-REX ETF (MSTU) declining 85%.

Despite the decline in bitcoin, MSTR's BTC acquisition remains profitable. Since initiating purchases in August 2020, the company is up 32% on its holdings, with an average cost basis of $66,300 per BTC and an unrealized profit of $10.65 billion at bitcoin's current price of about $87,000.

A closer look at MSTR's convertible debt highlights potential "liquidation prices" or forced bitcoin sales. Notably, all of the company's 499,096 BTC remain unencumbered, meaning MSTR has not pledged any bitcoin as collateral. An earlier convertible note using bitcoin as collateral with Silvergate Bank was fully repaid.

According to Bitcoin Overflow on X, MSTR has $8.2 billion in total outstanding debt, backed by 499,096 BTC, currently valued at $43.4 billion. As long as the value of MSTR's bitcoin exceeds its debt levels, the company would not need to sell any of its BTC holdings. In other words, bitcoin would have to decline all the way to about $16,500, or roughly another 80% from current levels, before MSTR would need to consider forced sales.

Two of the six outstanding convertible bonds—the 2029 and 2030 issues—are below their conversion price. These bonds account for $5 billion out of the $8.2 billion total. Even then, the debt does not mature until 2029, allowing time for recovery. In theory, MSTR could roll over more paper if necessary. If the value of the company's bitcoin were to drop