Discussions about potential forced sell-offs of large Bitcoin reserves by companies like MSTR, potentially triggered by market downturns, have been circulating on social media. This speculation was amplified during the 2022 cryptocurrency crash, where ETHZilla faced a similar pressure and sold off its holdings, exacerbating the price decline. However, Strategy’s approach offers a different perspective. How resilient is this strategy?
The potential for mandatory share buyback requirements on digital asset reserve companies (DATs) might become a reality in the case of significant market downturns. This could force sell-offs of crypto assets similar to the one witnessed with ETHZilla. Yet, Strategy stands out as it has utilized long-term borrowing and reimbursement strategies since 2020, significantly reducing its burden.
What Sets Strategy Apart
Strategy’s resilience stems from a number of key factors: its ability to maintain deep liquidity in its shares, secure favorable borrowing terms, and attract a large investor base that is less affected by market downturns. These advantages offer strategic protection compared to other companies.
Michael Saylor’s Strategy company recently regained prominence amidst challenges faced by similar companies, using transparent communication and new credit rating indicators to address concerns and reassure investors. Notably, Strategy’s long-term investment strategy has enabled it to maintain a robust 70-year dividend payment window even if Bitcoin’s price remains stagnant.
Ki Young Ju, founder and CEO of CryptoQuant, highlights Strategy’s ability to avoid forced sales as crucial for maintaining Bitcoin’s stability. A significant market downturn would need to occur for the company to face challenges, with Bitcoin remaining at a plateau around $20,000.