Is Strategy Dragging Bitcoin Down?

Bitcoin is up 2% year to date, but the share price of the world’s largest holder of Bitcoin, Strategy (NASDAQ:MSTR) (MSTR – formerly MicroStrategy), is down about 30% year to date. As we have noted in the past, Strategy is a Bitcoin holding company, a leveraged alternative to holding Bitcoin.

Its original business, enterprise analytics software, has lost money for the better part of the last ten years. As a software company, Strategy’s value is near zero, or even below zero, since it consistently loses money. However, it owns 641,692 bitcoin, making it the world’s largest corporate holder. Strategy’s Bitcoin is funded with debt and equity.

Of note is the approximate $8.2 billion in debt, which must be repaid or rolled over. Given that their Bitcoin is worth approximately $61 billion, debt holders are in a good position. But, Bitcoin holders are getting a little wary.

Michael Saylor, CEO of Strategy, has repeatedly said the company will never sell its Bitcoin. That may be true, or it could be a marketing ploy. The Bitcoin market is starting to consider that Saylor might have to sell Bitcoin to meet preferred dividends or debt maturities.

While the selling amount may be minimal, the potential that a huge self-annointed “HODL” investor is selling could be what is weighing on Bitcoin. HODL is slang for those investors who refuse to sell an investment despite drops in value that might scare other investors into selling. Might other HODL investors be rethinking their strategy and selling before Strategy?

Given that crypto has been a poster child for excessive speculation, the space warrants close watching because it is bleeding into other speculative assets, such as gold and AI-related technology stocks. The graph below, compares the year-to-date performance of Bitcoin (IBIT) and Strategy (MSTR).

What To Watch Today

Earnings

• No notable earnings releases

Economy

The Week Ahead

Wednesday will be the most important day of the week for market news. At 2 pm ET, the Fed will release the minutes from its October meeting. With the market pricing in a 50/50 chance of a rate cut, the minutes may provide better clarity on what they may or may not do. Further, they will likely shed more light on the rationale for the abrupt halt to QT and provide clues about when some form of QE could begin.

After the close, Nvidia (NASDAQ:NVDA) will report earnings. The market has high expectations, and Nvidia will likely meet or exceed the forecasts. However, as we have seen with Palantir (NASDAQ:PLTR) and Meta (NASDAQ:META), which also handily beat expectations, investors may sell good news.

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