Strategy Warns of Potential Bitcoin Sell-Off Amid $6 Billion Loss

Bitcoin has experienced significant volatility over the past week, with traders attempting to anticipate a potential "crisis scenario" for the cryptocurrency's price. The bitcoin price has plummeted to levels not seen since early November, causing panic among crypto holders who are advised to brace for an unknown threat.

As major financial institutions face what could be an "existential" shift in the bitcoin and crypto landscape, Michael Saylor’s software company, Strategy, has issued a warning that it may need to sell some of its bitcoin holdings to meet its financial obligations. According to a regulatory filing, Strategy has accumulated $42 billion worth of bitcoin, much of which was purchased at an average price of $67,000 per bitcoin. The company has financed its bitcoin purchases through the sale of convertible bonds and the issuance of stock.

Strategy's filing reveals that the company is expecting to record a near-$6 billion unrealized loss for the first quarter, despite a related $1.69 billion income tax benefit. The filing also warns that the company may not be able to regain profitability in future quarters, especially if the value of its bitcoin holdings continues to decline. A significant decrease in the market value of its bitcoin could adversely affect Strategy's ability to meet its financial obligations, the filing added.

At the end of March, Strategy held around $8 billion in debt, with annual interest payments of about $35 million and nearly $150 million in annual dividends on its stock. The company's stock price has nearly halved since reaching its November peak, which saw it included in the prestigious Nasdaq 100 index. Strategy currently owns almost 530,000 bitcoin, worth nearly $42 billion.

Crypto analysts are attempting to forecast the market's next move, with one prominent analyst predicting that bitcoin could crash back to around $10,000. According to the analyst's forecast, the reversion path back toward $10,000 is visible, similar to how the trends showed the path to $100,000 from $10,000 in 2020. However, it is important to note that this is a forecast and not an actual event that has occurred.