MicroStrategy in a Bit of a Tight Spot: What Happens If Bitcoin Takes a 90% Dive?
The Bitcoin Roller Coaster: MicroStrategy’s Wild Ride
So, MicroStrategy, or as I like to call them, the Bitcoin Big Shots, are back in the drama spotlight. Recently, Bitcoin crashed down to $84,000, putting MicroStrategy’s hefty Bitcoin stash, which minds you, is a jaw-dropping 649,870 BTC, in harm’s way. Their average buy price is $74,443, which means they’re just a hop, skip, and jump away from seeing red in the stock market. Yikes!
Peter Schiff: The Economic Party Pooper
Enter Peter Schiff, the economist with a knack for raining on parades. This week he did not hold back while questioning whether MicroStrategy’s Bitcoin strategy is more than just a sugar-coated fantasy. His social media rants have made it crystal clear that he thinks the whole operation, especially the Michael Saylor-led strategy of issuing MSTR shares to buy Bitcoin, is teetering on the edge of a cliff.
The Financial Juggling Act
Schiff wasn’t just throwing spaghetti against the wall to see what sticks. He made some valid points about MicroStrategy’s business model, which involves issuing preferred stocks and hoping that income-focused funds snatch them up while MicroStrategy scoops up Bitcoin. However, he warns that if those fund managers ever figure out that their promised yields are about as likely to come true as a unicorn sighting, they might start selling off their MSTR stocks faster than you can say “market crash!” That, dear readers, could create a real-life financial ‘death spiral.’
MicroStrategy’s Cheeky Response
In the midst of this financial soap opera, MicroStrategy decided to play it cool and claimed they had a long runway. According to an X post, they’d only need Bitcoin’s price to bump up by a measly 1.41% to cover their dividend obligations. They even brashly asserted, “At current $BTC levels, we have 71 years of dividend coverage!” because nothing says ‘financial stability’ like a 71-year plan, right?
The 90% Crash Scenario: What Could Go Wrong?
But wait, there’s more! Schiff doubled down on his critique, blasting MicroStrategy’s assertion that a potential 90% crash in Bitcoin wouldn’t scratch their investor’s surface. He made it abundantly clear that even if MicroStrategy is acting like everything is peachy, losing 90% of an investment would definitely leave its investors feeling a bit queasy.
Current State of Affairs: Still Floating on Profits?
As for the market’s pulse, even with Bitcoin above $80,000, it’s not all doom and gloom. MicroStrategy still holds a profit cushion, boasting 16% gains. That’s right, they’re currently lounging on a sweet profit of over $5 billion. Talk about riding high on the Bitcoin wave! But will that cushion hold firm if things take a nosedive?