Strategy which currently holds its Bitcoin assets at near break-even status after Bitcoin prices dropped to the upper $70,000 range.
The recent data indicates that the company will reach its first unrealized losses when the Bitcoin market value exceeds their average buying price by 1.8 percent. Executive Chairman Michael Saylor maintains that the company will face no forced liquidation danger because the current market conditions show only a minimal gap between assets and liabilities.
The company declared its intention to maintain its Bitcoin holdings while also purchasing more Bitcoin during times when prices experience major drops.
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Strategy’s Bitcoin holdings in numbers
The company holds 712,647 Bitcoin which has a current market value of 55.7 billion dollars. The company acquired Bitcoin at an average price of 76038 dollars per coin which allows them to maintain their position because Bitcoin currently trades at 77900 dollars.
At the cycle peak which occurred near 126000 dollars Strategy saw its Bitcoin holdings reach approximately 81 billion dollars even though the company owned 70000 fewer Bitcoin than before.
The comparison shows that price appreciation, not just accumulation, has driven much of the balance-sheet growth. The company has lost recent market gains but its capital structure remains unchanged. The limitations of liquidation risk
Why liquidation risk remains limited
The company Structure shows that its highly leveraged position because it uses convertible debt with long repayment terms to cover most of its debt obligations instead of using margin loans which need quick repayment and involve asset security based on current market value.
The company Structure protects Strategy from margin calls which would result from sudden Bitcoin price declines because the company has made its investments through long-term debt agreements.
The company Structure protects Strategy from price fluctuations during the day which would affect traders who use perpetual futures or leveraged funds. The company sells its assets only after experiencing price declines. Saylor believes that his company can maintain operations without liquidation even during major price drops because of their current financing system at the organization.
A long-term treasury approach
Saylor’s statement about buying Bitcoin even at extreme lows is not a price forecast. The organization considers Bitcoin to be a long-term treasury reserve which they will not use for short-term trading.
The approach has undergone testing during multiple major market downturns which include the current market correction that results from liquidity problems and mandatory debt reduction in the cryptocurrency markets. The strategy of Strategy has stayed the same because they continue to buy during market downturns while they avoid using leverage which would necessitate their withdrawal from positions.
