Strategy Says It Will Be Fine If BTC Hits $8K

Corporate Bitcoin holder Strategy (MSTR) has outlined an extreme downside scenario in its recent presentation, claiming that its balance sheet can potentially withstand an 88% decline in the price of Bitcoin. 

$6 billion in debt 

Strategy holds a Bitcoin reserve valued at $49.3 billion against a net debt of $6.0 billion. This gives the firm a comfortable “BTC Rating” (coverage ratio) of 8.3x.

If Bitcoin were to crash to $8,000, the value of the company’s reserve would shrink to $6 billion. 

This would still exactly match their $6.0 billion in net debt. This would leave the company with a coverage ratio of 1.0x.

Executive Chairman Michael Saylor took to X (formerly Twitter) to reassure markets regarding the company’s long-term obligations. 

“Our plan is to equitize our convertible debt over the next 3–6 years,” Saylor wrote.

The strategy is to “equitize existing convertible debt over time and avoid issuing additional senior debt.” The company plans to pay off bondholders by converting their debt into stock instead of depling their Bitcoin treasury or cash reserves.

What could sink the firm? 

The new data echoes the assessment that was recently made by Strategy CEO Phong Le. 

During the company’s fourth-quarter financial results webinar on Feb. 6, Le told investors that a flash crash wouldn’t be enough to sink the firm. He has clarified that prices would have to stay depressed for half a decade.

“In the extreme downside, if we were to have a 90% decline in bitcoin price, and the price was $8,000, that is the point at which our bitcoin reserve equals our net debt,” Le explained. “And we’d either look at restructuring, issuing additional equity, or issuing additional debt.”

Strategy reported a massive net loss of $12.6 billion for the fourth quarter. The loss was primarily due to unrealized losses on its digital asset holdings.