Strategy (formerly MicroStrategy), led by Michael Saylor, is the largest corporate holder of Bitcoin in the U.S. But the company is now facing serious challenges, squeezed between a plunging BTC price and a mountain of debt. In a recent 8-K filing with the SEC on April 7, Strategy warned that if it fails to resolve its current financial issues, it could be forced to liquidate its Bitcoin holdings.

Strategy in Financial Trouble

Strategy’s current model of financing Bitcoin purchases depends on market expectations of Bitcoin’s long-term bullish trend. If Bitcoin prices enter a prolonged period of stagnation or decline, the company will face dual pressures: needing to pay interest on its existing debt and facing the risk of equity dilution caused by stock issuance.

According to disclosures in the 8-K filing, Strategy currently holds 528,185 bitcoins, with a total value exceeding $40 billion and an average purchase price of $67,458 per coin. Since transforming into a “Bitcoin company” in 2020, it has continuously increased its holdings through financing, becoming a benchmark for crypto investment in the U.S. stock market. However, as Bitcoin’s price has dropped from its $100,000 peak at the end of 2024 to around $76,400, combined with $8.22 billion in debt, Strategy is now facing serious financial strain.

Strategy’s Bitcoin strategy was once the engine behind its soaring stock price, but now it has become a Damocles’ sword hanging overhead. The SEC filing clearly states that Bitcoin makes up “the vast majority” of the company’s balance sheet, and its price volatility directly determines the company’s financing ability and debt repayment prospects. If certain key factors spiral out of control, selling Bitcoin may become an unavoidable reality.

The biggest risk comes from a continued decline in Bitcoin’s price. If the price falls below the average cost of $67,458, or even approaches the recent low of $74,500, the company’s asset value would shrink significantly. The document warns that if Bitcoin falls below its book value, Strategy may find it difficult to raise funds by issuing stocks or bonds. Since Trump’s victory in November 2024, the company has purchased 275,965 BTC at an average price of $93,228, spending $25.73 billion. It is now facing an unrealized loss of $4.6 billion. Even worse, in Q1 2025 alone, its unrealized BTC loss reached $5.91 billion, further compounding the risks.

Meanwhile, a cash flow crisis has left the company walking on thin ice. Strategy’s core business—data analytics software—has failed to generate positive cash flow for several consecutive quarters. Yet it still needs to pay $35.1 million annually in debt interest and $146 million in dividends, totaling $181.3 million per year. If external financing falls short, selling Bitcoin may be the only option left. The filing mentions that the $8.22 billion in debt (as of the end of March 2025) puts immense repayment pressure on the company, and if market conditions worsen, it may even be forced to sell at a loss—below its cost basis.

Finally, market and security factors may become unexpected triggers. If Bitcoin custodians (such as banks or third-party custodians) go bankrupt or suffer cyberattacks that lead to asset losses, Strategy may be forced to sell its remaining holdings to cover the losses. The document specifically mentions that its insurance only covers a small portion of its Bitcoin holdings, highlighting the reality of this risk.

Of course, Strategy is not passively waiting for disaster. The company plans to ease pressure by issuing more shares or new debt. In Q1 2025, it spent a massive $7.7 billion to increase its Bitcoin holdings, buying at an average price of $95,000 per coin. However, as the market declined in April, this aggressive buying strategy clearly slowed down. If financing channels become blocked, selling Bitcoin will become the final lifeline.

Related reading: “Strategy Reset: Is the “Buy Buy Buy” Mode Back On? A Comprehensive Analysis of the New Financing Plan”

How impactful would a potential sell-off be on the market?

Strategy’s Bitcoin holdings account for about 2.5% of the total BTC supply. If it starts selling, the market is unlikely to remain calm. The scale of the sell-off depends on the company’s specific needs, and the impact will escalate accordingly.

If the purpose is only to cover short-term expenses, such as paying $181.3 million in annual interest and dividends, about 2,318 BTC would need to be sold. This represents less than 0.5% of its 528,185 BTC holdings and would have a relatively limited impact on the market. It may only cause minor price fluctuations, and investors might not panic.

However, if Strategy needs to repay part of its debt—say, $1 billion—it would need to sell around 12,800 BTC, or about 2.4% of its holdings. In a market where the average daily trading volume is just $10–30 billion and liquidity is relatively low, such a sale could push prices down by 5% to 10%, exerting noticeable pressure on the market.

In a worst-case scenario, if Strategy is forced to repay its entire $8.22 billion debt at once, it would need to offload about 105,000 BTC—equivalent to 20% of its holdings. A liquidation of this size would be extremely difficult for the current market to absorb and could trigger a flash crash, especially considering how sensitive the Bitcoin market is to large trades. The recent plunge from $83,000 to $74,500 is a strong reminder of that.

The most extreme scenario would be the company going bankrupt or being forced into liquidation, which could mean selling all 528,185 bitcoins—worth over $40 billion. This would be a devastating blow to the market and could cause Bitcoin prices to be cut in half, or even worse. However, the possibility of a full liquidation is relatively low, unless the company encounters a systemic crisis such as debt default combined with forced regulatory liquidation. No matter the scenario, Strategy’s actions could become a major turning point for the Bitcoin market and deserve close attention.

Another side of the market impact is the chain reaction. If Strategy sells, other institutions or retail investors may follow suit, leading to a vicious downward spiral in Bitcoin prices. The tariff policies introduced after Trump’s return to office have already worsened risk-off sentiment across markets, and Strategy’s move could become the “last straw” that breaks the market’s back.

What’s even more controversial is that this situation touches on Michael Saylor’s credibility. As a vocal supporter of Bitcoin, Michael Saylor has repeatedly declared on media like CNBC that he would “never sell” his coins—and even said he plans to bequeath his BTC to organizations that support the asset after his death. However, the SEC filing’s language—“may sell Bitcoin below cost”—appears to break that promise.

Will Strategy really sell its Bitcoin?

Strategy’s Bitcoin strategy began in 2020, when Saylor positioned it as a form of “digital gold” to hedge against inflation. Through issuing convertible bonds, preferred shares, and ATM offerings, the company has invested a total of $35.6 billion to purchase Bitcoin, and at one point its holdings had unrealized gains of several billion dollars. However, due to the recent pullback in Bitcoin’s price combined with debt pressure, the company has failed to turn a profit for three consecutive quarters.

In fact, the risk of Bitcoin sell-off mentioned in the recent SEC filing is not the first time it has been brought up. Strategy has submitted a total of 25 8-K filings this year. The 8-K filings labeled “Results of Operations and Financial Condition” are generally submitted at the beginning of each month. These monthly updates are routine disclosures. As early as January 6, a risk warning mentioning “possible Bitcoin sale” appeared in an 8-K filing. However, the filings from February and March did not mention this. This is the first time in three months that such a warning reappears in an 8-K filing. The wording this time—“may sell at unfavorable prices”—clearly signals increased financial stress, likely tied to the recent sharp decline in Bitcoin’s price and the $5.91 billion in unrealized losses.

Looking back at the last bear market, Strategy also faced severe challenges, with negative net assets, but was not forced to sell its Bitcoin. This was mainly due to two key factors: first, the debt maturity dates were relatively far off (the earliest being 2028); second, founder Michael Saylor holds 48% of the voting rights, making it difficult for any liquidation proposal to pass. Therefore, even if Bitcoin falls below its cost basis, the likelihood of a “death spiral” triggered by forced selling remains low.

Compared to the last bear market, Strategy now has more tools at its disposal: it can issue bonds, issue additional stock, or use its $40 billion worth of BTC holdings as collateral to raise funds.

From a macro perspective, Bitcoin is also gaining increasing recognition from sovereign wealth funds and institutional investors, with long-term prospects looking positive. Although short-term price volatility may bring financial pressure, Strategy’s debt maturity is still far away, and the overall market environment is improving—meaning the actual risk of a forced sell-off remains limited.

Related reading: “ Michael J. Saylor’s Strategic Bet: Bitcoin’s Premium Issuance and Capital Control”

In the short term, the market will closely watch the company’s Q1 earnings report and upcoming financing plans. As for whether it will sell Bitcoin, the market is holding its breath. The next move from this company won’t just determine its own fate—it could also shape Bitcoin’s future landscape.

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