Company’s Cash Reserves and Long-Dated Debt Reduce Pressure for Liquidation
Concerns over whether Strategy (MSTR) could be forced to offload part of its massive Bitcoin holdings sparked fresh debate this week. But according to Bitwise chief investment officer Matt Hougan, the idea that the firm would need to liquidate Bitcoin during a downturn is “just flat wrong.”
Hougan argues that Strategy’s financial position provides significant breathing room. The company holds approximately $1.4 billion in cash, carries no debt due until 2027, and currently owns Bitcoin at an average cost basis of $74,436. With Bitcoin trading around $92,000, the firm remains 24% above its acquisition level, reinforcing the view that the balance sheet is not under distress.
He emphasized that a forced sale scenario is highly unlikely, noting that selling Strategy’s $60 billion Bitcoin position would represent an amount equivalent to two years of ETF inflows, a move that would severely shock the broader market.
Fears Prompted by CEO’s ‘Last Resort’ Comment
Market worries escalated after CEO Phong Le suggested that selling Bitcoin could be considered only as a “last resort” if Strategy’s market value fell below the value of its Bitcoin reserves and traditional financing options evaporated. However, Hougan maintains that this scenario is far removed from current conditions.
Strategy must cover roughly $800 million in annual interest payments, an amount Hougan says the company can sustain for more than a year and a half using existing cash alone. He added that the firm has flexibility to roll over or convert upcoming debt instruments, minimizing pressure to liquidate assets.
Index Changes May Exert Pressure but Not Force Sales
Strategy shares have fallen 24.69% over the past month, partly influenced by warnings from MSCI that it may exclude companies with balance sheets heavily weighted toward digital assets. Such an exclusion would force index funds to reduce exposure.
Yet, Hougan says historical precedent shows these events are “typically smaller than expected and already priced in.” He pointed to Strategy’s 2023 inclusion in the Nasdaq-100, which required $2.1 billion in forced buying but generated minimal price reaction.
As the market navigates prolonged volatility, Hougan insists that Strategy’s structure and liquidity leave no immediate pressure to sell Bitcoin, reinforcing the firm’s long-standing commitment to its digital asset strategy.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.