As bitcoin attempts to recover from its slump below $81,000, Strategy, one of the largest institutional BTC accumulators, has chosen silence. For the first time in weeks, the company made no announcement Monday regarding its weekly acquisitions. An unusual behavior that raises many questions.
In brief
- Strategy made no Bitcoin purchases last week, breaking from its weekly routine.
- The company's stock has plunged 67% from its high of $543 and 38% month-over-month.
- The threat of exclusion from MSCI indices looms over Strategy, with potential outflows of $11.6 billion.
- The company still holds nearly 650,000 bitcoins, valued at $57.8 billion.
Strategy Marks Historic Pause in Its Bitcoin Accumulation
TD Cowen analyst Lance Vitanza revealed Monday morning that Strategy has not issued any securities under its mark-to-market offering programs. The company, accustomed to starting each week with the announcement of its latest bitcoin acquisitions, therefore took an unusual pause.
The move comes as its share price is teetering dangerously close to its lowest level in 14 months.
Strategy stock was trading at $179 on Friday, representing a 5% rebound. However, this surge does not mask the reality: a dizzying fall of 67% since the peak of $543 reached last year.
Over the past month alone, the stock has lost 38% of its value, closely following the downward trajectory of bitcoin. The crypto, which hit an all-time high of $126,000 last month, is now trading around $88,000, after falling as low as $81,500 last week.
This break in shopping is not completely new. Strategy had already observed a similar shutdown in early October, a period which coincided with the end of a fiscal quarter.
However, the current context is radically different. The company's market capitalization fell below the value of its bitcoin reserves earlier this month, undermining its ability to increase its per-share holdings through the issuance of common stock.
Clouds gather over Strategy
The future of Strategy crystallizes concerns with the specter of exclusion from the MSCI indices next February. The organization highlighted the similarities between Strategy and investment funds, a category excluded from its indices. For Lance Vitanza, this comparison remains “as misguided as it is regrettable”.
The analyst defends Strategy's identity as “a publicly traded operating company with a $500 million software business and a unique treasury strategy using Bitcoin as productive capital.”
However, the consequences of a withdrawal would be dramatic. JPMorgan estimates capital outflows could reach $11.6 billion if Strategy leaves MSCI indexes.
A massive forced sell-off would occur precisely when the stock is already trading “at severely depressed levels,” according to Vitanza. This scenario could permanently compromise the Bitcoin accumulation model which has propelled Strategy to the rank of a key player.
Faced with these challenges, the company adapted its financing strategy. This year, faced with declining profitability of common stock issues, Strategy turned to dividend-paying preferred stocks to raise billions of dollars.
Strategy nevertheless retains a major asset: 649,870 bitcoins in reserve. But this pause raises a crucial question: Is this just a breather before getting back on track, or is the company rethinking its strategy from the ground up? The next few weeks will be decisive.
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