Strategic Moves in Crypto: Selling Bitcoin as Last Resort

In a recent interview on the What Bitcoin Did show, CEO Phong Le outlined a critical financial strategy for Strategy, emphasizing the necessity of selling Bitcoin only as a last resort. He stated that this decision would be considered if the company's multiple to net asset value, or mNAV, drops below one and if the company finds itself without access to new capital.

Le stressed that unloading Bitcoin would be mathematically justified in such a scenario to protect the Bitcoin yield per share. He expressed a strong aversion to being the company that sells Bitcoin, asserting that financial discipline must take precedence over emotional reactions during challenging market conditions.

Strategy's business model is fundamentally based on raising capital when its shares trade at a premium to net asset value and utilizing those funds to purchase Bitcoin, thereby increasing the amount of Bitcoin held per share.

However, if that premium were to vanish, Le indicated that selling part of the Bitcoin holdings to fulfill financial obligations could be acceptable to shareholders if issuing new equity would lead to higher dilution.

Le also highlighted the financial pressures facing the company, noting annual obligations nearing $750 million to $800 million as recent issues mature. His strategy aims to fund these obligations primarily through raising equity at a premium to mNAV.

Le mentioned that consistently paying dividends from their various instruments each quarter would help reassure the market, demonstrating that the company can maintain its dividend payments even during a bear market.

Additionally, he defended the long-term investment thesis for Bitcoin as a scarce, non-sovereign asset with widespread global appeal, citing interest from various countries including Australia, the U.S., Ukraine, Turkey, Argentina, Vietnam, and South Korea.

Recently, Strategy introduced a new Bitcoin Credit dashboard to alleviate investor concerns following Bitcoin's recent decline and a sell-off in digital asset treasury stocks. The company, recognized as the largest corporate holder of Bitcoin, claims it has sufficient dividend coverage for decades, even if Bitcoin's price remains stagnant.

Le stated that their debt is well-covered even if Bitcoin prices drop to their average purchase price of approximately $74,000 and remains manageable even if the price falls to $25,000. This comprehensive strategy reflects the evolving dynamics within the cryptocurrency investment landscape, particularly in how companies manage their Bitcoin holdings in response to market fluctuations.