Strategy, led by Michael Saylor (formerly MicroStrategy), as the U.S. company holding the most Bitcoin, is currently facing a crisis due to a double pressure of falling Bitcoin prices and massive debt. According to an 8-K filing submitted to the SEC on April 7, Strategy stated that if it cannot handle the current financial difficulties, it may be forced to sell its Bitcoin holdings.

Strategy in Financial Distress

Strategy's current strategy of financing Bitcoin purchases relies on the market's long-term bullish expectations for Bitcoin. If the price of Bitcoin falls into long-term volatility or declines, the company will face double pressure: not only to pay off existing debt interest but also to deal with the equity dilution risk brought by stock issuance.

According to the 8-K filing, Strategy currently holds 528,185 BTC, with a total value exceeding $40 billion, and an average purchase cost of $67,458 per BTC. Since transitioning to a "Bitcoin company" in 2020, the company has continuously increased its position through financing, becoming a benchmark for cryptocurrency investment in the U.S. stock market. However, with the price of Bitcoin falling from its high of $100,000 at the end of 2024 to around $76,400, coupled with a $8.22 billion debt burden, Strategy's financial situation is facing a severe test.

Strategy's Bitcoin strategy was once the engine driving its stock price surge, but now it has become the looming sword of Damocles. The SEC filing clearly states that Bitcoin accounts for the "vast majority" of the company's balance sheet, with its price fluctuations directly determining the company's financing ability and debt repayment prospects. Once certain key factors spiral out of control, selling Bitcoin may become an unavoidable reality.

The greatest risk comes from the continued decline in the price of Bitcoin. If the price falls below the cost of $67,458, or even slides towards the recent low of $74,500, the company's asset value will plummet significantly. The filing warns that if Bitcoin drops below the book value, Strategy may struggle to raise funds through stock or bond issuances. Since President Trump's victory in November 2024, the company has purchased 275,965 BTC at an average price of $93,228 per BTC, costing $25.73 billion, and is now sitting on an unrealized loss of $4.6 billion. Even worse, in the first quarter of 2025, the unrealized loss on Bitcoin is as high as $5.91 billion, adding insult to injury.

At the same time, the cash flow crisis has put the company on thin ice. Strategy's core business — data analysis software, has been unable to generate positive cash flow for several consecutive quarters. However, the company still has to pay $35.1 million in annual debt interest and $146 million in dividends, totaling $181.3 million. If external financing does not keep up, selling Bitcoin is almost the only way out. The document mentions that the $8.22 billion debt (as of the end of March 2025) has created immense repayment pressure, and if the market environment deteriorates, the company may even be forced to sell at a price below cost, a "loss price."

Lastly, market and security factors could become unexpected triggers. If a Bitcoin custodian institution (such as a bank or third-party custodian) goes bankrupt or suffers a network attack resulting in asset loss, Strategy may be forced to sell the remaining holdings to cover the losses. The document specifically mentions that its insurance only covers a small amount of Bitcoin, underscoring the reality of this risk.

Of course, Strategy is not sitting idly by. The company plans to alleviate the pressure by issuing new shares or new debt. In the first quarter of 2025, it extravagantly spent $7.7 billion, acquiring Bitcoin at an average price of $95,000 per coin. However, after entering April, with the market downturn, this aggressive buying strategy has noticeably slowed down. If the financing channels are blocked, selling coins becomes the last straw.

Related Reading: "Strategy Resumes "Buy Buy Buy" Mode? A Comprehensive Analysis of the New Financing Plan"

How Would Potential Selling Pressure Impact the Market?

Strategy's Bitcoin holdings represent approximately 2.5% of the total Bitcoin supply, and once sold, the market may find it difficult to remain calm. The scale of the sell-off depends on the company's specific needs, with the impact escalating accordingly.

If it is just to meet short-term expenses, such as paying the annual interest and dividends totaling $181.3 million, approximately 2,318 Bitcoins would need to be sold. This only accounts for less than 0.5% of its total holding of 528,185 coins, resulting in a relatively limited impact on the market, possibly only causing a small fluctuation that may not overly alarm investors. However, if Strategy needs to repay part of its debt, such as $1 billion, the sell-off scale would increase to around 12,800 Bitcoins, accounting for 2.4% of the holding. In an environment where the Bitcoin market's daily average trading volume is only $100-300 billion and liquidity is low, such a sell-off could push prices down by 5% to 10%, enough to make the market feel significant pressure.

Of even greater concern is the scenario where the Strategy must repay the entire $8.22 billion debt all at once, causing the scale of the sell-off to surge to around 105,000 bitcoins, equivalent to 20% of its holdings. Such a large-scale sell-off would be almost impossible to absorb in the current market and is likely to trigger a price crash, especially considering the Bitcoin market's sensitivity to large transactions—a recent flash crash from $83,000 to $74,500 has already demonstrated this.

The most extreme scenario would be the company going bankrupt or being forced to liquidate, potentially meaning selling off all 528,185 bitcoins, valued at over $40 billion. This would deal a devastating blow to the market, potentially causing a halving of the Bitcoin price, or even worse. However, the likelihood of such a comprehensive sell-off is low unless the company faces a systemic crisis, such as debt default combined with regulatory forced liquidation. In any scenario, Strategy's actions could become a significant turning point for the Bitcoin market and are worth close attention.

On the flip side of the market impact is the chain reaction that could occur. If Strategy sells off, other institutions or retail investors may follow suit, causing Bitcoin's price to enter a vicious cycle. Trump's tariff policy after taking office has already exacerbated risk asset sell-off sentiment, and Strategy's actions could be the "straw that breaks the camel's back" for the market.

What's even more controversial is that this incident also involves Michael Saylor's credibility. Michael Saylor, as a staunch supporter of Bitcoin, has repeatedly stated on media outlets like CNBC that he will "never sell his coins," and has even said he will bequeath his Bitcoin to organizations supporting the asset after his passing. However, the wording in the SEC filing, stating that they "might sell Bitcoin at a price below cost," seems to break this promise.

Will Bitcoin Really Be Sold Off?

Strategy's Bitcoin strategy began in 2020 when Saylor positioned it as "digital gold" to hedge against inflation. Through issuing convertible bonds, preferred stock, and ATM offerings, the company has invested a total of $35.6 billion to buy Bitcoin, with unrealized gains in its holdings reaching billions of dollars at one point. However, with the recent drop in the price of Bitcoin combined with debt pressure, the company has had three consecutive quarters of losses.

In fact, the sales risk mentioned in this SEC filing is not the first time it has been raised. Strategy has submitted a total of 25 8-K filings this year, with the subject labeled "Operating Results and Financial Condition," typically submitted at the beginning of each month. Monthly reports on "Operating Results and Financial Condition" are routine. As early as the 8-K filing on January 6th, the risk alert of "potentially selling Bitcoin" was mentioned; however, the filings in February and March did not mention this, and this current filing marks a return to referencing the risk warning after a three-month hiatus. The straightforward language in this 8-K filing, stating that they "might sell at disadvantageous prices," to some extent reflects the heightened pressure currently, likely related to the recent significant drop in Bitcoin price and the $5.91 billion unrealized loss.

Looking back at the last bear market, Strategy also faced a severe test, with a negative net asset value, yet it was not forced to sell Bitcoin. This was mainly due to two key factors: first, the long debt maturity date (earliest in 2028), and second, founder Michael Saylor holding 48% of the voting rights, making it difficult for a liquidation proposal to pass. Therefore, even if Bitcoin were to drop below the cost basis, the possibility of triggering a "death spiral" sell-off is also low. Compared to the last bear market, the current Strategy also has various tools to respond: issuing debt, issuing more shares, or using its $40 billion Bitcoin holdings as collateral for financing.

Furthermore, from a macro perspective, Bitcoin is gaining more and more recognition from sovereign wealth funds and institutions, with a positive long-term outlook. Although short-term price volatility may bring financial pressure, Strategy has a long debt maturity, and with the improvement of market conditions, the actual risk of selling off is limited.

Related Read: "Michael J. Saylor's Strategic Bet: Bitcoin's Premium Issuance and Capital Control"

In the short term, the market will closely monitor its quarterly report and subsequent financing plans. As for whether there will be a sell-off, the market will wait with bated breath. The next step of this company is not only related to its own survival, but may also affect the future landscape of Bitcoin.

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