Strategy: “Bitcoin would have to fall to $8,000 to threaten our balance sheet”

Uk Jin

Summary

Strategy said bitcoin would need to fall to $8,000 and stay there for five to six years for a material threat to emerge to the repayment of its convertible notes.
With bitcoin trading well below its average purchase price of $76,052, Strategy reported a $12.6 billion net loss in the fourth quarter.
Strategy, which holds 713,502 BTC (about $50 billion), said it will continue its long-term strategy despite short-term price swings.

Strategy, the publicly listed company that holds the world’s largest amount of bitcoin (BTC), said that even a sharp drop in bitcoin’s price would not pose a major problem for the company’s financial structure in the near term.

According to digital-asset outlet The Block on the 6th (Korea time), CEO Phong Le said during the fourth-quarter earnings call, “Bitcoin would have to fall to $8,000 and remain at that level for five to six years for there to be a material threat to our ability to repay convertible notes.”

Le added, “In an extreme scenario where bitcoin falls 90% to around $8,000, that would be the point at which our bitcoin holdings equal Strategy’s net debt,” and explained, “In that case, it would become difficult to repay the convertible notes using our bitcoin reserves, and we could consider restructuring, additional share issuance, new borrowings, and other options.”

The comments come as investor concerns have grown over Strategy’s financial structure amid the recent decline in bitcoin prices.

As of 3:10 p.m. that day, bitcoin was trading at $66,035, down 6.28% from the previous day, according to CoinMarketCap. That is a 28.71% drop from the prior month.

In particular, this is well below Strategy’s average bitcoin purchase price of $76,052. As bitcoin’s price fell, Strategy posted a net loss of $12.6 billion (about 16 trillion won) in the fourth quarter.

Strategy’s total bitcoin holdings are reported to be 713,502 BTC. At current market prices, that is worth about $50 billion.

Andrew Kang, Strategy’s chief financial officer (CFO), said, “This quarter’s results were driven primarily by unrealized losses from the decline in bitcoin’s price at quarter-end,” adding that “we continue to execute our long-term strategy even in a highly volatile environment.”

Michael Saylor, chairman of Strategy’s board, emphasized, “Quarterly price moves can be abrupt and unsettling, but our strategy is designed with a long-term perspective,” adding, “It is built to withstand short-term price fluctuations and extreme scenarios as well.”

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