The cryptocurrency world is reeling, and Bitcoin's recent slump has left a trail of casualties in its wake. Among the hardest hit are leveraged ETFs tied to MicroStrategy, now rebranded as Strategy, a company famously known for its massive Bitcoin holdings. Despite a modest 9% rebound on Tuesday, Bitcoin's price has been on a wild ride, plunging to a staggering $84,000 just a day prior. This volatility has sent shockwaves through the market, particularly affecting Strategy, which holds over 650,000 BTC—the largest corporate reserve in the world.
But here's where it gets controversial: Strategy's CEO, Phong Le, recently hinted at the possibility of selling some of their Bitcoin holdings to navigate the current market turmoil. This statement has sparked debate among investors and analysts alike. Is this a prudent move to safeguard the company's financial health, or does it undermine Strategy's long-standing commitment to Bitcoin as a long-term asset?
The fallout from Bitcoin's decline has been especially brutal for Strategy's leveraged exchange-traded funds (ETFs). These funds, designed to amplify returns on the company's stock, have instead become some of the biggest losers in this year's crypto downturn. Reuters reports that two specific ETFs—the T-Rex 2X Long MSTR Daily Target ETF and the Defiance Daily Target 2x Long MSTR ETF—have lost nearly 85% of their value year-to-date. Even the T-Rex 2X Inverse MSTR Daily Target ETF, which bets against the stock, has plummeted by 48%.
And this is the part most people miss: Strategy's shares (MSTR) have nosedived by over 40% this year, primarily due to Bitcoin's price crash. This has shifted investor focus to the company's “mNAV” (market net asset value) metric, which compares its enterprise value to its Bitcoin holdings. Le's comments about potentially selling Bitcoin if the mNAV falls below 1 have raised concerns about the company's long-term strategy. Currently, Reuters estimates this ratio at around 1.1, leaving little room for error.
Analysts, however, remain cautiously optimistic. Mike O’Rourke, chief market strategist at JonesTrading, notes that while Le's remarks may dilute the company's message of resilience, Strategy's revised full-year outlook—ranging from a $6.3 billion profit to a $5.5 billion loss—reflects the harsh realities of the market. This is a stark contrast to their earlier forecast of $24 billion in net profit, which was based on Bitcoin reaching $150,000 by year-end.
Vincenzo Vedda, chief investment officer at DWS, offers a blunt assessment: “Strategy’s approach works brilliantly when prices rise. But when they fall, the company’s strategic options become severely limited.” Since joining the Nasdaq 100 index, Strategy’s shares have plummeted over 70% from their November 2024 peak, halving in value over the past year.
Here’s the surprising twist: Despite this dismal performance, analysts are not hitting the panic button. Out of 16 brokerages tracking Strategy, 10 recommend it as a “buy,” and four suggest a “strong buy,” with a median price target of $485. This implies a potential 183% upside over the next year, according to LSEG data. As of this writing, Bitcoin has managed to claw its way back above the $92,000 mark, offering a glimmer of hope for Strategy and its investors.
What do you think? Is Strategy’s potential Bitcoin sale a smart move or a betrayal of its long-term vision? And can the company recover from this year’s losses, or is this the beginning of the end for its crypto-centric strategy? Let us know in the comments below!
