The Big Bitcoin Bull Strategy Is Allegedly Going Defensive – May Not Buy BTC for a While, Here’s Why

Strategy (MicroStrategy), the world’s largest publicly traded company holding Bitcoin (BTC), has made a significant shift from its aggressive growth strategy to a “defensive” mode.

The company’s recent moves indicate that it is now focused on fulfilling its debt obligations and strengthening its cash reserves, rather than making new Bitcoin purchases.

Strategy, known as the largest institutional investor in the cryptocurrency world, has paused its long-standing practice of “selling shares to buy Bitcoin.” According to a recent CNBC report, the company sold $750 million worth of shares this week; however, this time the proceeds were not used to buy Bitcoin, but rather to boost the company’s cash reserves, which have reached $2.2 billion.

The primary purpose of the fund, which the company established earlier this month, is to cover preferential dividend payments and debt interest without having to sell their Bitcoin holdings. Strategy, whose shares have lost nearly 50% of their value since the beginning of the year, appears to be taking a more protective stance due to market conditions, according to Chairman Michael Saylor.

Analysts point out that Strategy’s core business model has reached a turning point. The company’s strategy to date has been based on selling its shares at a premium and using the proceeds to buy Bitcoin. However, currently, the company’s shares are trading below the net value of its Bitcoin holdings (approximately 80 cents).

The fact that the share price has entered a discount phase makes the new share issuance “dilutive” for existing investors.

Strategy faces an even bigger test in the coming days. On January 15th, MSCI is expected to decide whether to delist the company from its indices. According to JP Morgan’s estimates, a potential delisting, and other index providers following suit, could trigger a massive sell-off of approximately $9 billion.

While the company’s average cost for acquiring Bitcoin is around $75,000, and Bitcoin is trading at around $89,000, this buffer appears to be shrinking compared to the past. Although company management has stated they could restructure debt before liquidation even if the Bitcoin price drops by 50%, the erosion of market confidence is considered the biggest risk.

*This is not investment advice.