Led by Michael Saylor, Strategy (formerly MicroStrategy), as the single enterprise in the U.S. holding the most Bitcoin, is struggling under the dual pressures of falling Bitcoin prices and massive debt. According to an 8-K filing submitted to the SEC on April 7, Strategy stated that if it cannot address its current financial difficulties, it may be forced to sell its Bitcoin Holdings.

Strategy in Financial Trouble

Strategy's current financing model relies on the market's expectation of a long-term bullish outlook for Bitcoin. If the price of bitcoin falls into a prolonged period of volatility or decline, the company will face a double pressure: it will have to pay interest on its existing debt and deal with the risk of equity dilution from the issuance of additional shares.

According to the disclosure in the 8-K filing, Strategy currently holds 528,185 Bitcoins, with a total value exceeding 40 billion USD, and an average purchase cost of 67,458 USD/coin. Since its transformation into a "Bitcoin enterprise" in 2020, the company has continuously increased its holdings through financing methods, becoming a benchmark for cryptocurrency investment in the U.S. stock market. However, as the price of Bitcoin has fallen from the peak of 100,000 USD at the end of 2024 to around 76,400 USD, coupled with a debt burden of 8.22 billion USD, Strategy's financial situation is facing severe challenges.

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Strategy's Bitcoin strategy was once the engine behind its soaring stock price, but now it has become a Damocles sword hanging over its head. SEC documents clearly indicate that Bitcoin accounts for a "vast majority" of the company's balance sheet, and its price fluctuations directly determine the company's financing ability and debt repayment prospects. If certain key factors spiral out of control, selling Bitcoin may become a reality that must be faced.

The biggest risk comes from the continued fall in Bitcoin prices. If the price falls below the cost price of $67,458 and even slides towards the recent low of $74,500, the company's asset value will significantly shrink. The document warns that if Bitcoin falls below its book value, the Strategy may find it difficult to raise funds through the issuance of stocks or bonds. Since Trump's victory in November 2024, the company has purchased 275,965 Bitcoins at an average price of $93,228 each, costing $25.73 billion, and has now incurred an unrealized loss of $4.6 billion. Worse still, in the first quarter of 2025, the unrealized loss on Bitcoin reached as high as $5.91 billion, which exacerbates the risk.

At the same time, the cash flow crisis has put the company on thin ice. The core business of Strategy—data analysis software—has failed to generate positive cash flow for several consecutive quarters. However, the company still has to pay $35.1 million in debt interest and $146 million in dividends each year, totaling $181.3 million. If external financing does not keep up, selling Bitcoin may be the only way out. The document mentions that $8.22 billion in debt (as of the end of March 2025) creates a repayment pressure as heavy as a mountain, and if the market environment worsens, the company may even be forced to sell at a "loss price" below cost.

Finally, market and security factors may become unexpected triggers. If a Bitcoin custodian (such as a bank or a third-party custodian) goes bankrupt or suffers a cyber attack resulting in asset loss, the Strategy may be forced to sell remaining Holdings to cover the losses. The document specifically mentions that its insurance only covers a small amount of Bitcoin, highlighting the reality of this risk.

Of course, the strategy is not to sit idly by. The company plans to alleviate pressure by issuing new shares or bonds. In the first quarter of 2025, it spent a whopping $7.7 billion to increase its Bitcoin holdings at an average price of $95,000 per coin. However, after entering April, as the market declined, this aggressive buy-buy-buy strategy clearly slowed down. If financing channels become blocked, selling coins becomes the last resort.

Related reading: "Strategy Restart the 'Buy Buy Buy' Model? A Comprehensive Analysis of the New Financing Plan"

What is the impact of potential selling pressure on the market?

The Holdings of Strategy account for about 2.5% of the total Bitcoin supply. Once sold, the market is likely to be unsettled. The scale of the sell-off depends on the company's specific needs, and the impact will escalate accordingly.

If it is only to deal with short-term expenses, such as paying annual interest and dividends totaling $181.3 million, it would require selling about 2,318 Bitcoins. This accounts for less than 0.5% of its total holdings of 528,185, and the impact on the market is relatively limited, likely only triggering small fluctuations that investors may not panic over. However, if Strategy needs to repay part of its debt, such as $1 billion, the scale of the sell-off would expand to about 12,800 Bitcoins, accounting for 2.4% of its holdings. In an environment where the daily trading volume of the Bitcoin market is only $10-30 billion and liquidity is relatively low, such a sell-off could push prices down by 5% to 10%, enough to put noticeable pressure on the market.

In a more severe scenario, if the Strategy must repay the entire $8.22 billion debt at once, the sell-off scale will surge to about 105,000 Bitcoins, equivalent to 20% of its Holdings. Such a large-scale sell-off would be nearly impossible to digest in the current market and is likely to trigger a price flash crash, especially considering the Bitcoin market's sensitivity to large transactions — the recent flash crash from $83,000 to $74,500 has fully demonstrated this.

The most extreme scenario is the company's bankruptcy or forced liquidation, which could mean the sale of all 528,185 Bitcoins, with a total value of over 40 billion USD. This would be a devastating blow to the market, potentially causing the Bitcoin price to be halved or even worse. However, the likelihood of such a full-scale sell-off is low, unless the company faces a systemic crisis, such as debt defaults compounded by regulatory forced liquidations. In either scenario, Strategy's actions could become a significant turning point for the Bitcoin market, warranting close attention.

The other side of market impact is the chain reaction. If Strategy sells off, other institutions or retail investors may follow suit, leading to a vicious cycle in Bitcoin prices. The tariff policy after Trump's inauguration has intensified the selling sentiment for risk assets, and Strategy's actions may become the "last straw" that breaks the market.

What has sparked even more discussion is that this matter also involves the credibility of Michael Saylor himself. As a staunch supporter of Bitcoin, Michael Saylor has repeatedly claimed on media outlets such as CNBC that he "will never sell his coins" and even stated that he would bequeath his Bitcoin to organizations that support the asset after his death. However, the wording in the SEC documents, "may sell Bitcoin at a loss," has shattered this promise.

Will there really be a sell-off of Bitcoin?

Strategy's Bitcoin strategy began in 2020 when Saylor positioned it as "digital gold" to combat inflation. Through the issuance of convertible bonds, preferred stocks, and ATM increases, the company has invested a total of $35.6 billion in purchasing Bitcoin, with Holdings at one point showing a floating profit of several billion dollars. However, the recent fall in Bitcoin prices, coupled with debt pressure, has caused the company to fail to turn a profit for three consecutive quarters.

In fact, the sell-off risk mentioned in this SEC document is not the first time it has been referenced. Strategy submitted a total of 25 8-K documents this year, with the 8-K documents labeled "Operating Results and Financial Condition" generally submitted at the beginning of each month. The monthly report on "Operating Results and Financial Condition" is a routine operation. As early as the 8-K document on January 6, there was a risk warning mentioning the "potential sale of Bitcoin"; however, the documents for February and March did not mention this, making it the first time in three months that this risk warning is referenced again in the 8-K form. However, the straightforward wording in this 8-K document stating "may sell at unfavorable prices" somewhat reflects the intensifying pressure, which may be directly related to the recent significant fall in Bitcoin and the $5.91 billion unrealized loss.

Looking back at the last bear market, Strategy also faced severe tests, with net assets being negative, yet it was not forced to sell Bitcoin. This was mainly due to two key factors: first, the debt maturity date is far away (as early as 2028), and second, founder Michael Saylor holds 48% of the voting rights, making it difficult for liquidation proposals to pass. Therefore, even if Bitcoin falls below the cost price, the possibility of triggering a sell-off "death spiral" is relatively low. Compared to the last bear market, today's Strategy also has various tools to cope: issuing bonds, increasing stock issuance, or using its $40 billion Bitcoin holdings as collateral for financing.

In addition, from a macro trend perspective, Bitcoin is gaining recognition from more and more sovereign funds and institutions, with a positive long-term outlook. Although short-term price fluctuations may bring financial pressure, the Strategy has a longer debt maturity, and with an improving market environment, the actual risk of sell-off is limited.

Related Reading: "Michael J. Saylor's Strategic Bet: Bitcoin's Premium Issuance and Capital Manipulation"

In the short term, the market will closely watch its quarterly report and subsequent financing plans. As for whether there will be a sell-off, the market will hold its breath. The next step of this company is not only related to its own survival but may also affect the future landscape of Bitcoin.