Can MicroStrategy Avoid a Financial Crisis? Bitcoin Price is Key

MicroStrategy, as the world's largest holder of Bitcoin, has its financial condition closely related to the price trends of Bitcoin. As of the end of 2024, the company holds approximately 470,000 Bitcoins, with a total cost of nearly $28 billion, and an average purchase price of $62,500 per coin.

The company mainly raises funds to purchase Bitcoin in four ways: using its own funds, issuing convertible preferred bonds, issuing secured preferred bonds, and issuing stocks at market price. Currently, MicroStrategy's total liabilities are approximately $8.2 billion, while total assets ( are mainly Bitcoin ) with a market value of $43 billion, and the leverage ratio is only 19%. This means that the company will face the risk of insolvency only if the price of Bitcoin falls below $16,500 for a long period.

In the short term, the price fluctuations of Bitcoin primarily affect the company's financial statements, but do not trigger a direct financial crisis. In the long term, if Bitcoin enters a bear market, the company may face serious financing pressure. MicroStrategy's software business is relatively small and cannot accumulate enough cash through its own operations to cover debts or continue purchasing Bitcoin.

Key financial data shows that the company's current debt mainly consists of low-interest convertible bonds, resulting in relatively low short-term repayment pressure. However, if the price of Bitcoin continues to remain sluggish in the future, causing the stock price to fall below the conversion price, bondholders may demand cash repayment, increasing the company's cash flow pressure.

The stock price of MicroStrategy is highly correlated with the price of Bitcoin, with a correlation of 0.7-0.8. Due to the leverage effect, the company's stock price fluctuations are often greater than that of Bitcoin itself. Currently, the market valuation of MicroStrategy is generally higher than its net value of held Bitcoin, but this premium may disappear as the price of Bitcoin falls.

Although the company still has strong debt repayment ability in the short term, if Bitcoin enters a long-term bear market, it may lead to financial difficulties. If the price of Bitcoin falls to the range of $12,000-15,000, the company's Bitcoin assets will be below the total debt, which may result in technical bankruptcy.

The company's co-founder Michael Saylor holds 46.8% of the voting rights, which allows him to prevent the company from selling Bitcoin or changing its strategy. However, if the price of Bitcoin falls below a certain threshold, the company may be forced to take emergency measures, including selling part of its Bitcoin, restructuring its debt, or even considering bankruptcy protection.

Overall, MicroStrategy currently maintains financial stability, but its fate entirely depends on the future trend of Bitcoin. If Bitcoin remains weak in the long term, the company may face a debt crisis or even bankruptcy; however, if Bitcoin continues to rise, the company will maintain strong growth. Investors should closely monitor Bitcoin price trends to assess MicroStrategy's long-term financial risks.