Strategy's stock has seen a remarkable decline amid Bitcoin's current price correction, raising concerns about the long-term sustainability of the company's strategy.
Challenges to Strategy's Sustainability
Strategy is facing questions about its ability to maintain its Bitcoin purchasing strategy, which relies on raising additional capital backed by its growing Bitcoin treasury. Analysts warn that if liabilities significantly outweigh assets, this strategy might become unviable.
Debt-fueled Bitcoin Buys
Since 2020, Strategy has spent over $33 billion on Bitcoin at an average cost of $66,000 per coin, earning an unrealized profit of over $10 billion. These purchases were financed through stock issuance and around $9.5 billion in convertible debt. With most of its debt maturing no sooner than 2027, there is a reduced risk of forced Bitcoin liquidation due to short-term BTC price drawdowns.
Stock Price Outlook
On February 25, Bitcoin's price dropped below $90,000 for the first time since November 2024, resulting in Strategy shares falling over 10% to around $245. Despite the stock being down almost 50% from its all-time highs, Benchmark analysts remain confident in Strategy's ability to generate 'Bitcoin yield,' targeting a 15% yield by 2025.
Current market conditions present significant challenges for Strategy, but analysts remain optimistic about its ability to adapt and sustain its Bitcoin strategy.
