As the Bitcoin market faced turbulence surrounding the possible bankruptcy of Genesis Trading and Digital Currency Group (DCG), chatter continued to surface that Michael Saylor and MicroStrategy bitcoin bet could be in danger if the price continues to fall.
This elephant in the room was studied by Will Clemente of Reflexivity Research and Sam Martin of Blockworks Research. In their reportthey examine the questions of whether MicroStrategy has a Bitcoin liquidation price, how high it is, and how the company’s debt is structured.
MicroStrategy holds the largest Bitcoin holdings among publicly traded companies, amounting to 130,000 BTC. In the past, the company has even taken out new loans to grow its Bitcoin holdings.
Specifically, MicroStrategy borrowed $2.37 billion to buy its Bitcoin at an average price of around $30,000 per BTC. Saylor’s company debt profile can be found in the table below.
Is MicroStrategy and Saylor’s leveraged bitcoin bet in danger?
The convertible notes carry minimal interest costs for MicroStrategy, according to the research report, because the notes were issued at very favorable MSTR conversion rates.
In addition, the conversion into shares can only take place on June 15, 2025 and at the earliest on August 15, 2026, unless the company undergoes a “fundamental change”.
According to Reflexivity Research, this is the case of a delisting from NASDAQ or NYSE, a merger or acquisition of MicroStrategy, or a change in majority ownership of the company.
Given that Michael Saylor holds 67.7% of the voting rights, this last scenario is very unlikely, so convertible bonds do not represent a major risk.
The 2028 senior secured notes, on the other hand, are bad for several reasons, according to the report. They include a high fixed interest rate, tie up 11.5% of BTC holdings, and could cause problems if the maturity date is triggered.
“However, this poses no immediate threat to MicroStrategy,” Blockworks Research said.
For Silvergate’s $205 million secured loan in 2025, with approximately 85,000 BTC liquid, Saylor’s liquidation price for this loan is achieved at a Bitcoin spot price of $3,561. Thus, it does not pose an immediate risk either. Research on reflexivity states:
While the aforementioned risks to MicroStrategy and its BTC stash are relatively far from becoming immediate concerns, the bigger concern is the company’s ability to repay interest on its outstanding debt.
MicroStrategy’s operating results from its software business show a significant decline in profitability, and a potential recession could further impact operating results.
In its latest 10-Q report, the company itself warns that it could incur operating losses in future periods. At the same time, Saylor’s company has nearly $67 million in liquid assets, which will act as a buffer over the next 6-12 months.
Additionally, the company has approximately 85,000 liquid BTC on its balance sheet to supplement collateral if Bitcoin falls below $13.5,000 and pushes the Silvergate loan-to-value ratio above 50%.
“However, the software industry must recover in order to avoid the forced sale of BTC in 2024,” Blockworks Research concluded. For now, however, MicroStrategy’s bitcoin bet shouldn’t worry investors.
As of press time, BTC price has again been rejected from major resistance at $16,600.