Strategy’s unrealized Bitcoin loss exceeded $13 billion as share price fell below reserve value

Strategy ended the week amid sharp criticism from the crypto industry and with Bitcoin stuck at around $60,000. Before the weekly close, Bitcoin was trading near $60,102 as the company’s co-founder Michael Saylor shared a reserves chart on his X account, commenting, “We’re going to need more charts.” Some investors interpreted Saylor’s message as a new signal to buy.

Reserves under pressure as losses mount

The company’s latest financials paint a much more cautious picture. Strategy currently holds 847,363 BTC, with an average purchase cost of $75,653 per coin. Since Bitcoin is trading near $60,000, the company’s paper losses on its Bitcoin holdings have now surpassed $13 billion.

This gloomy scenario is reflected in Strategy’s own market value. The firm’s market capitalization has fallen to roughly $29 billion, about 43% below the market value of its Bitcoin reserves. The growing gap has made it increasingly difficult for the company to sustain its prior cycle of raising capital and acquiring more Bitcoin.

For reference, mini Net Asset Value (mNAV) is the ratio between a company’s market capitalization and the net asset value of the assets it holds. For firms with substantial crypto assets on their books, this metric helps investors determine whether the stock is trading at a premium or discount relative to its reserve holdings.

Share issue threshold not met

Company bylaws stipulate that issuing new shares to purchase more crypto is only allowed when the market value exceeds the value of Bitcoin reserves by at least 22%. In other words, the mNAV ratio must reach 1.22. At present, this ratio has slipped to just 0.99.

Given the current numbers, issuing new shares is not seen as economically viable. Such a move would dilute the holdings of existing shareholders, and the company’s self-imposed framework may force management to halt further Bitcoin purchases for now.

Cash constraints meet Wall Street scrutiny

Strategy’s free cash position has also come under pressure. Its preferred shares, labeled STRC, have fallen around 25% below face value, now trading at $74.57. The company’s remaining $1.4 billion in cash reserves would cover roughly 14 months of dividend payments based on its annual $1.2 billion in obligations.

Grayscale is a leading asset manager specializing in digital investment products. Ripple, meanwhile, focuses on cross-border payment solutions. As Ripple CEO, Brad Garlinghouse is frequently involved in industry debates over crypto regulation and company strategies.

Key price levels in focus

Michael Saylor maintains that as long as Bitcoin holds above $8,000, there is no risk of forced liquidation for the company. Still, technical indicators imply that it could take some time before Strategy’s buy-in costs are recovered. Major trading activity currently centers around resistance levels at $67,098 and $75,682.

Altogether, this outlook underscores the need for a more robust Bitcoin rally if Strategy is to return to aggressive accumulation. Unless Bitcoin approaches the $75,000 region, the company’s balance sheet stress and related debt discussions are likely to persist.

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