If MicroStrategy is forced to sell BTC, how much selling pressure will it bring to the market?

Author: Ashley

Strategy (formerly MicroStrategy), led by Michael Saylor, is the single largest Bitcoin holder in the United States and is in trouble due to the dual pressures of falling Bitcoin prices and huge debts. According to the 8-K filing submitted to the SEC on April 7, Strategy stated that if it cannot cope with the current financial difficulties, it may be forced to sell its Bitcoin holdings.

Strategy in financial distress

Strategy's current financing and coin purchase model relies on the market's long-term bullish expectations for Bitcoin. If the price of Bitcoin falls into long-term volatility or decline, the company will face double pressure: it will have to pay interest on existing debts and deal with the risk of equity dilution brought about by additional stock issuance.

According to the 8-K filing, Strategy currently holds 528,185 bitcoins with a total value of over $40 billion and an average purchase cost of $67,458 per bitcoin. Since its transformation into a "bitcoin enterprise" in 2020, the company has continued to increase its holdings through financing, becoming a benchmark for cryptocurrency investment in the U.S. stock market. However, as the price of Bitcoin has fallen from a high of $100,000 at the end of 2024 to around $76,400, coupled with a debt burden of $8.22 billion, Strategy's financial situation is facing severe tests.

Strategy's Bitcoin strategy was once the engine of its stock price surge, but now it has become a sword of Damocles hanging over its head. SEC documents clearly point out that Bitcoin accounts for the "vast majority" of the company's balance sheet, and its price fluctuations directly determine the company's financing ability and debt repayment prospects. Once certain key factors get out of control, selling Bitcoin may become a reality that has to be faced.

The biggest risk comes from the continued decline in Bitcoin prices. If the price falls below the cost price of $67,458, or even slides to the recent low of $74,500, the value of the company's assets will shrink significantly. The document warns that if Bitcoin falls below its book value, Strategy may find it difficult to raise funds by issuing stocks or bonds. Since Trump's victory in November 2024, the company has purchased 275,965 bitcoins at an average price of $93,228 per bitcoin, costing $25.73 billion and now has a floating loss of $4.6 billion. Worse, in the first quarter of 2025, the unrealized loss of bitcoin was as high as $5.91 billion, which made the risk worse.

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

Finally, market and security factors may become unexpected triggers. If a Bitcoin custodian (such as a bank or third-party custodian) goes bankrupt or suffers a cyber attack that causes asset losses, Strategy may be forced to sell remaining positions to make up for the losses. The document specifically mentions that its insurance only covers a small amount of Bitcoin, highlighting the reality of this risk.

Of course, Strategy is not sitting still. The company plans to ease the pressure by issuing additional shares or new bonds. In the first quarter of 2025, it spent $7.7 billion to increase its holdings of Bitcoin at an average price of $95,000 per coin. However, after entering April, as the market fell, this aggressive buying strategy slowed down significantly. If financing channels are blocked, selling coins becomes the last straw.

What is the impact of potential selling pressure on the market?

Strategy's Bitcoin holdings account for about 2.5% of the total supply of Bitcoin. Once sold, the market may be difficult to calm down. The scale of the sell-off depends on the specific needs of the company, and the impact will be progressive.

If it is just to cope with short-term expenses, such as paying annual interest and dividends totaling $181.3 million, it will need to sell about 2,318 Bitcoins. This accounts for less than 0.5% of its total holdings of 528,185 bitcoins, which has a relatively limited impact on the market and may only cause small fluctuations. Investors may not panic too much. However, if Strategy needs to repay part of its debt, such as $1 billion, the scale of the sell-off will expand to about 12,800 bitcoins, accounting for 2.4% of its holdings. In an environment where the average daily trading volume of the Bitcoin market is only $10-30 billion and liquidity is low, such a sell-off may push the price down by 5% to 10%, which is enough to make the market feel obvious pressure.

In a more serious situation, if Strategy has to repay all $8.22 billion of debt at one time, the scale of the sell-off will surge to about 105,000 bitcoins, equivalent to 20% of its holdings. Such a massive sell-off would be almost impossible to digest in the current market and would likely trigger a price flash crash, especially given the Bitcoin market’s sensitivity to large transactions, as the recent flash crash from $83,000 to $74,500 has amply demonstrated.

The most extreme scenario is that the company goes bankrupt or is forced to liquidate, which could mean selling all 528,185 Bitcoins, worth more than $40 billion. This would be a devastating blow to the market and could cause Bitcoin prices to halve, or even worse. However, the likelihood of such a full sell-off is low unless the company encounters a systemic crisis, such as a debt default coupled with a regulatory forced liquidation. In either scenario, Strategy’s move could be an important turning point in the Bitcoin market and is worth paying close attention to.

The other side of the market impact is the chain reaction. If Strategy sells, other institutions or retail investors may follow suit, causing Bitcoin prices to enter a vicious cycle. The tariff policy after Trump took office has intensified the selling sentiment of risky assets, and Strategy's move may become the "last straw" that crushes the market.

What is even more controversial is that this matter also involves Michael Saylor's credibility. As a staunch supporter of Bitcoin, Michael Saylor has repeatedly declared in media such as CNBC that he "will never sell Bitcoin" and even stated that he will bequeath Bitcoin to organizations that support the asset after his death. However, the wording of the SEC document: "Bitcoin may be sold below cost" seems to break this promise.

Will Bitcoin really be sold?

Strategy's Bitcoin strategy began in 2020, when Saylor positioned it as "digital gold" to fight inflation. Through the issuance of convertible bonds, preferred stocks and ATM additional issuance, the company has invested a total of US$35.6 billion in Bitcoin, and its floating profit once reached billions of dollars. However, the recent decline in Bitcoin prices and debt pressure have caused the company to fail to make a profit for three consecutive quarters.

In fact, the risk of selling in this SEC document is not mentioned for the first time. Strategy has submitted a total of 25 8-K documents this year. The 8-K documents with the subject "Operating Results and Financial Status" are generally submitted at the beginning of each month. The "Operating Results and Financial Status" report at the beginning of each month is a routine operation. As early as the 8-K document on January 6, the risk warning of "possible selling of Bitcoin" was mentioned; however, the documents in February and March did not mention it. This time, the risk warning was cited again in the 8-K form after a lapse of three months. However, the straightforward wording of the 8-K document this time, "possible selling at unfavorable prices", reflects the current intensification of pressure to a certain extent, which may be directly related to the recent large decline in Bitcoin and the unrealized loss of US$5.91 billion.

Looking back at the last round of bear market, Strategy also faced severe tests, with negative net assets, but was not forced to sell Bitcoin. This is mainly due to two key factors: first, the debt maturity date is far away (the earliest is 2028), and second, the founder Michael Saylor holds 48% of the voting rights, making it difficult for the liquidation proposal to pass. Therefore, even if Bitcoin falls below the cost price, the possibility of triggering a "death spiral" of selling is low. Compared with the last round of bear market, Strategy now has a variety of coping tools: issuing bonds, issuing additional stocks, or using $40 billion in Bitcoin holdings as collateral financing.

In addition, from a macro trend, Bitcoin is gaining recognition from more and more sovereign funds and institutions, and its long-term prospects are positive. Although short-term price fluctuations may bring financial pressure, Strategy has a long debt term and the market environment has improved, so the actual risk of selling is limited.

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

In the short term, the market will pay close attention to its first quarter 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 about its own survival, but may also affect the future pattern of Bitcoin.