Bitwise’s View on MSTR and Bitcoin Holdings

Matt Hogan, the chief investment officer at Bitwise, asserted that Strategies (MSTR) doesn’t have to sell its Bitcoin to stay afloat if the stock price declines. He emphasized that those who suggest otherwise are “completely wrong.”

In a memo released on Tuesday, Hogan pointed out that if MSTR’s stock were to fall below its net asset value (NAV), the company wouldn’t be compelled to sell its Bitcoin holdings. He stressed the strong conviction of Chairman Michael Saylor in Bitcoin.

Hogan expressed that it would be significantly detrimental to the Bitcoin market if MSTR were obliged to liquidate its $60 billion Bitcoin holdings all at once. This amount equates to about two years’ worth of inflows for Bitcoin ETFs. However, he remains confident that such a scenario is unlikely since MSTR has no debt due until 2027 and sufficient cash to manage interest payments for the foreseeable future.

Worries regarding the potential sale of large Bitcoin holdings were heightened after CEO von Reh suggested last week that the company might consider selling some assets as a “last resort” if its market value dips below the actual value of its Bitcoin.

Lee mentioned that if MSTR’s funding avenues dried up, it would be reasonable to offload some Bitcoin to safeguard the company’s “Bitcoin yield per share.”

Additionally, Strategies is facing a prolonged downturn within the crypto market and the risk of delisting from the MSCI stock index.

Despite these concerns, Hogan believes that Strategies can endure the challenges ahead. He noted that the situation isn’t bleak enough to necessitate selling Bitcoin, particularly as the cryptocurrency is currently trading at around $92,000, which is 24% higher than the average purchase price of $74,436 for its holdings.

He added that the company’s financials do not present immediate pressures to sell Bitcoin, suggesting MSTR has enough room to maneuver even if the stock price falls below NAV.

“MSTR has two related obligations regarding its debt; it owes approximately $800 million in interest annually and must also manage certain debt instruments as they mature,” he explained.

“Interest payments are currently manageable. With $1.4 billion in cash reserves, the company can comfortably cover dividends for well over a year,” he concluded.

In the past month, MSTR’s stock has dropped by 24.69%, closing at $186.01 on Friday.

Some of the downward pressure may stem from the announcement by Morgan Stanley Capital International in October, which suggested that digital asset treasury companies with more than 50% of their balance sheets in crypto assets might be removed from their index. This move could force index-tracking funds to sell, adding further strain on MSTR.

However, Hogan doubts that this would substantially shift sentiment towards Strategies or its stock price. He recalled that historically, such events often have a smaller impact than anticipated. “When MSTR was added to the Nasdaq 100 Index last December, $2.1 billion worth of stock needed to be acquired, yet the price barely budged,” he remarked.

Overall, the situation remains complex, and the big lingering question is whether the biggest Bitcoin holder can indeed influence market trends.