Bitcoin price hovers around $82.000 due to Donald Trump's tariff policies, raising questions about Strategy and its $40.000 billion portfolio in the cryptocurrency.
Bitcoin is facing its first significant bear market of 2025, with a 20% decline in recent weeks, putting its price near $82.000 currently. This pullback, linked in large part to trade tensions fueled by the Trump administration's tariffs on Mexico, Canada and other economic partners, has rekindled concerns about companies that are highly exposed to the cryptocurrency.
Strategy, led by renowned Bitcoiner Michael Saylor, currently has $41.000 billion in BTC, backed by $8.200 billion in debt.
Financial analysis publication The Kobeissi Letter this week examined the risks of a possible forced liquidation of the company if the price of Bitcoin were to continue to fall.
Although some investors have questioned Strategy's stability in the face of crypto market volatility, the report concludes that the debt instruments used, the maturity terms and the shareholding structure make it a catastrophic scenario is unlikely in the short term. According to the data, even if the price of Bitcoin were to fall to $42.000, which would be at least half of its current value, the company would not face immediate liquidation pressures.
Strategy's debt structure: convertible bonds and key terms
Strategy has funded much of its Bitcoin purchases by issuing convertible bonds, a debt instrument that allows holders to convert their investment into company stock under predetermined conditions. According to The Kobeissi Letter, 80% of its total debt, about $6.500 billion, is in these bonds, with maturities scheduled between 2027 and 2032.
A critical aspect is that the conversion prices of these bonds, which is the value at which they can be converted into shares, are significantly below the current price of Strategy shares, which is around $240. According to the publication, this situation creates an incentive for holders to opt for conversion rather than demanding cash redemption, and this will be the case as long as the share price remains stable. In addition, the distant maturities, the closest being in 2027, give the company a margin of time to manage its debt without urgency.
BUY BITCOINThe ratio of total debt to the value of your Bitcoin portfolio also plays a key role. With leverage of 19%, Strategy would have to face a Bitcoin drop of more than 50% for its reserves to no longer cover its obligations, a scenario considered extreme even in the current bearish context.
Source: CoinMarketCap
The Kobeissi Letter talks about “fundamental change”
The publication explained that Strategy’s credit agreements include clauses that would only trigger a forced liquidation in the event of a “fundamental change” in the company, such as bankruptcy, dissolution or a majority sale of assets. The Kobeissi Letter noted that such events require prior approval by shareholders, a process that involves voting and bureaucratic deadlines.
Furthermore, it should not be overlooked that Michael Saylor, founder of the company, controls 46,8% of the shareholder votes. This concentration of power makes any move contrary to his strategy of holding Bitcoin for the long term difficult. Even in a scenario where other shareholders were to push for a dissolution, Saylor could easily block it, said the post.
“Michael Saylor was recently asked about the settlement.
Their response was that even if Bitcoin fell to $1, they still wouldn’t be liquidated.”
These conditions contrast with historical cases of liquidations in the sector, where companies with short-term debt or tight warranty clauses succumbed to sudden falls. In contrast, at Strategy, the combination of long terms and protective share structures acts as a buffer against market volatility.
What are the ongoing risks and impact of a prolonged bear market?
While an immediate liquidation seems unlikely, The Kobeissi Letter warns that a sustained low price scenario could affect Strategy’s ability to attract new capital. The firm has relied on equity and debt issuances to fund its Bitcoin purchases, a viable strategy in bull markets but one that may be vulnerable in bear markets.
If Bitcoin were to remain below $60.000 for several quarters, investors might question the profitability of the company’s business model, which could make future funding rounds difficult. However, the publication also stressed that institutional support for Bitcoin, which is evident in inflows into exchange-traded funds such as ETFs traded in the United States, and the Trump administration’s pro-crypto policies, can significantly mitigate this risk.
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Additionally, Bitcoin's current decline is attributed more to macroeconomic factors, such as tariffs and inflation, than to intrinsic flaws in the cryptocurrency or its underlying technology, which is why several analysts anticipate a price recovery once geopolitical tensions stabilize.
In conclusion, although Strategy could face a complex environment with the Bitcoin price retreating, its financial and legal mechanisms drastically reduce the risk of liquidation. Its debt structure, maturity terms and Michael Saylor's shareholding control act as barriers against immediate pressures.
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