With MicroStrategy (NASDAQ: MSTR) doubling down on its decision to purchase more Bitcoin (BTC), a market player has identified a key economic event that could see the company offload its holdings.
On November 11, the firm announced the purchase of an additional 27,200 Bitcoin for about $2.03 billion. This latest acquisition brings MicroStrategy’s total Bitcoin holdings to 279,420 BTC.
A sale would contradict MicroStrategy’s Bitcoin strategy, which aims to evolve into a Bitcoin bank, creating capital market instruments across diverse financial products.
Now, independent analyst Gert van Lagen has warned that a recession could spell disaster for these Bitcoin holdings, with potential implications for both MicroStrategy and the broader cryptocurrency market, he stated in an X post on November 12.
“When recession sets in, and $MSTR is forced to sell off its BTC stash, $1k-$10k isn’t that far away. From a decentralized perspective it’s not great that a big company owns way too much Bitcoin, either. First blow-off top,” Lagen said.
Lagen cautioned that holding such a large amount of Bitcoin is unsustainable for a company of MicroStrategy’s size and that it may be forced to sell to avoid liquidation in the event of an economic downturn.
This aggressive Bitcoin buying spree has been funded by the issuance of convertible notes and substantial debt, sparking both admiration from crypto proponents and concern within financial circles.
Criticism of MicroStrategy’s Bitcoin strategy
One critic of MicroStrategy’s approach is economist Peter Schiff, a long-time Bitcoin skeptic and proponent of gold.
To this end, following the recent purchase, Schiff highlighted the inherent risk in MicroStrategy’s cyclical strategy. According to Schiff, the entire system could collapse if Bitcoin’s value plummets, preventing MicroStrategy from covering its debts.
“MSTR borrows money and issues shares to buy more Bitcoin. As a result, the price of Bitcoin goes up, which causes the price of MSTR to increase, allowing it to borrow more money and sell more shares to buy even more Bitcoin. Wash, rinse, repeat—what could possibly go wrong?” Schiff posed.
As previously reported by Finbold, Schiff warned that MicroStrategy is gambling with investors’ money by investing in Bitcoin.
However, MicroStrategy’s executive chairman Michael Saylor countered this view, noting that the company has achieved a BTC yield of 26.4% or 157.5 BTC per day, acquired without operational costs.
With Bitcoin rallying to a record high of about $90,000, MicroStrategy’s stock has also surged in tandem as markets react positively to Donald Trump’s reelection.
MSTR stock price analysis
By press time, MSTR was valued at $348, gaining 0.6% in the past 24 hours and rallying 31% in the past week. Year-to-date, MicroStrategy remains one of the best performers, with 408% gains.
MSTR YTD stock price chart. Source: Google Finance
These returns mean MSTR has outperformed the S&P 500 index alongside other major movers like Nvidia (NASDAQ: NVDA). MicroStrategy’s performance has led to discussions on whether other S&P 500 companies should adopt a Bitcoin strategy.
Interestingly, the MSTR rally has seen some investors, such as billionaire and Holocaust survivor George Soros, miss out on the momentum after selling his holdings in the company earlier.
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