Will MicroStrategy's empire collapse? The myth of never selling 650,000 BTC encounters the shattering of 700 million debt.

MicroStrategy (MSTR) has acknowledged for the first time that if its stock price remains below 1 times the book value for a long time, the company may sell some Bitcoin. This company, which has made “never sell Bitcoin” a corporate belief over the past five years, holds about 650,000 Bitcoins, accounting for approximately 3% of the global Circulating Supply. The company is under the pressure of having to pay out $750-800 million in preferred stock dividends each year, which is not the kind of payment that can be reduced when the market is bad, but rather a rigid expense written into the contract.

Radical Transformation from Software Company to Bitcoin Reserve

MicroStrategy was originally a normal software selling company. One day, the boss stood up and said: “From today on, we will convert all the company's idle cash into Bitcoin. We will continue to buy more as we have money, treating the company as a long-term holding tool for Bitcoin.” After saying this, he wasn't just drawing on a PPT; he was serious: using cash to buy Bitcoin, and if that wasn't enough, issuing bonds to continue buying; if that still wasn't enough, issuing preferred stock and new shares to raise money from the market, and still buying Bitcoin.

At its most exaggerated, the market also cooperated, and everyone was willing to buy its stock at a price far higher than “net asset value per share.” Here’s a term that sounds quite scary: mNAV (modified net asset value). The reasoning is quite simple: calculate the market value of all the Bitcoins the company holds, then divide by the total share capital to get a number: how much Bitcoin asset value corresponds to each share of stock.

If the stock price is above this number, it indicates that the market is paying a premium for its “story”: for example, if the actual asset per share corresponds to 100 dollars, but the stock price can be driven up to 250 dollars, that would be 2.5 times mNAV. At its most scenic moment, MSTR did indeed come close to 2.5 times mNAV. This is a machine that can be called a dream for the company: using “1 dollar of Bitcoin assets” to exchange for “2.5 dollars in cash” from the market; taking part of it to pay interest and preferred stock dividends, and using the rest to continue buying Bitcoin, making the balance sheet stronger and stronger.

From the results, that flywheel indeed spins beautifully: as long as the stock price is high and the market believes in the story of “never selling,” it will not run out of fuel. This structure acts as a money printer when the premium is high, and turns into a shredder when the premium is knocked down, used to “bite” its own shareholders.

Escape Clause Left by New CEO

A turning point, coming from the new CEO Feng Li. Compared to his predecessor, he is almost a different species: the former stood on stage discussing civilization, currency, and freedom, while Feng Li seems more like a person buried in Excel, ultimately focused on numbers. After taking office, he did something that hardly anyone paid attention to at the time: he added a seemingly rational clause to the company rules.

The company will only consider selling Bitcoin when two conditions are met simultaneously. First, MSTR's stock price is consistently below 1 times mNAV, simply put, the market price is cheaper than the pile of Bitcoin it holds. Second, the market is in a closed state, meaning that it cannot sell during trading hours while simultaneously causing a market crash, but rather, it needs to take action quietly when the market is closed to minimize impact.

When those words first appeared, many people thought they might not be needed. But those who trade have a professional habit: everything written as terms will eventually be verified by reality. Reality comes faster than imagination. As of November 30, MSTR's mNAV is only 0.95 times. If the company's Bitcoin and other assets translate to $100 per share, but the stock price is only $95, that means: the market is no longer willing to pay a penny more for its story, and it has even been discounted.

When the mNAV is at 2.5 times, the company issuing new shares is “benefiting everyone”: old shareholders use 1 dollar of book assets to indirectly pull back 2.5 dollars in cash from the market, and everyone is happy at that time. But when issuing new shares at 0.95 times, it becomes “taking from old shareholders as a cushion”: every share issued is equivalent to cutting a piece of net worth from the old shareholders' hands and giving it to the new shareholders.

Deadly Strangulation of 700-800 Million USD Preferred Stock Dividends

The harder reality is that this company has a permanent stone slab weighing down on it: it must pay $750-800 million in preferred stock dividends each year. This is not the kind of arrangement where you can pay less when the market is bad; it's written in the contract: no delays, no dodging, no ambiguity. Not paying is considered a default.

In the era of high premiums, this amount of money does not feel like the sky is falling: stock prices are high, new shares can still be issued, and new bonds can also be issued, there will always be ways to roll it out. But when the mNAV is pressed down to 0.95, and even at risk of approaching 0.9 at any moment, this 700-800 million dollars starts to feel like a door panel being pressed down step by step. From that moment on, “never sell” is no longer just a sentiment; it begins to turn into a mathematical problem.

Financial Squeeze Chain Faced by MicroStrategy

Stock price plummets: Down 66% from the July high of $473, to $159.

mNAV Collapse: Dropped from 2.5 times to 0.95 times, losing financing capability.

Fixed Expenses: Annual preferred stock dividends of $750 million to $800 million, which cannot be delayed or waived.

Financing Dilemma: The sluggish stock price has turned issuing new shares into “diluting existing shareholders”, and the market is not buying into it.

Forced Liquidation: When cash flow breaks, the only option is to sell Bitcoin.

MicroStrategy announced that it has established a $1.44 billion dollar reserve to support preferred stock dividends and debt interest payments over the next 12 to 24 months. This reserve provides a 21-month buffer, but it only delays the issue rather than resolves it. If the Bitcoin price remains sluggish and stock prices do not rebound, MicroStrategy will still face the same predicament after 21 months.

If MSTR sells off 650,000 BTC, a chain collapse

This company holds nearly 3% of the global Bitcoin supply. From the perspective of trading models, once it is really forced to sell coins due to cash flow pressure, the chain of events will likely unfold as follows. Step one, the spot market takes a hit directly, with large sell orders crashing in, causing Bitcoin prices to start accelerating downward. Step two, leveraged longs begin to be 'asked to exit' by the system, as many people bought futures, contracts, and structured products, all backed by leverage. When the price falls to a certain level, the system will trigger forced liquidations.

In the third step, the ETF is forced to help everyone “liquidate positions together.” Once Bitcoin-related ETFs encounter a large number of redemptions, the fund can only continue to sell coins in the spot or futures market to meet the payouts, which adds another layer of selling pressure. What’s more troublesome is that futures and options prices often lead the way. Once the derivatives market starts pricing in “worse conditions in the future,” the “future price” it offers will drag down the sentiment of spot traders.

For those who genuinely regard Bitcoin as “digital gold,” this scene is very jarring: on one side is the narrative of “long-term storage” and “globally neutral asset” that has been packaged beautifully for many years; on the other side is the real trading chain: enterprises selling coins due to cash flow, leveraged players facing cascading liquidations, ETFs passively cutting positions, and derivative product prices being pushed down along with spot prices. Therefore, when someone says, “If MSTR is forced to sell, this could very well be the most awkward live slap in the face to the 'digital gold narrative.'” From a structural perspective, this statement is not exaggerated at all.

The Conspiracy Theory of Stablecoins Needing Bitcoin Sacrifices

There is a more extreme perspective in the market. Simply put, this perspective suggests that a new role may gradually emerge in the future global monetary system: stablecoins, backed by countries, banks, or specific institutions, will become the “main currency” in the digital world. If one day, these “semi-official” stablecoins take on most of the functions of cross-border settlement, financial contract pricing, and digital asset trading, their position in the new system would be very similar to some “special currency notes” in history.

In the last century, Europe had a similar operation: government debt had become so overwhelming that if all the debt were honestly disclosed on the balance sheet, external investors would be scared away, and internal politics couldn't withstand it either. So someone came up with a trick: to print a batch of “special notes” that would only circulate in specific areas, such as for military industry and infrastructure projects. Through this set of “parallel currency,” old debts can be slowly digested, and new investments can be rolled out first, essentially using a new shell to create a layer separating the bad debts of the old era.

Some macro researchers are now guessing: will stablecoins in the digital age become a similar “new shell”? In this imagination, Bitcoin is the most glaring and unruly symbol in the old world. It is packaged as “digital gold” and “decentralized reserve asset,” and serves as the center of all “anti-establishment narratives.” If you really want to support a new system centered around stablecoins, the first step from a narrative perspective is not to glorify stablecoins, but to pull the original idols down from the altar.

Thus, the extreme viewpoint of this faction looks like this: “In order for the state-supported stablecoin to become the ruler of the new system, Bitcoin must first undergo a complete demystification, preferably one that makes it so that 'we can never return to the previous height' of demystification.” In this scenario, MSTR, which has tied itself to Bitcoin, if it is dragged down by debt and dividends, and forced to sell off, happens to become a very beautiful “counterexample”: “You see, the outcome of betting the company's fate on Bitcoin is like this.”

This logic is very conspiratorial and smooth; it holds up logically, but the evidence is insufficient. You may disagree with it, but it's worth remembering: in the financial world, narratives are never isolated. Sometimes, a crack in a company's balance sheet will just happen to align with the needs of another story.

The three key points that investors should really pay attention to.

Setting aside these grand speculations, let's return to the issues that ordinary investors truly face. First, any slogan of “never selling” must come with a caveat: “as long as cash flow permits.” As long as there is debt, as long as there is interest, as long as there are preferred stock dividends, as long as there is an expiration date, when stock prices turn, premiums vanish, and financing tightens, it is cash flow that speaks, not faith.

Second, when looking at a company that holds a certain asset, don't just look at how much it has “bought”, but also at “how it can sustain it”. Holding a Bitcoin without debt allows a person to weather the cycle; someone burdened with a rigid bill of 700-800 million dollars will be forced to become a seller at some price point. This is not a matter of stance, but a matter of structure.

Thirdly, the price of Bitcoin is not just the result of “whether the market is in a good mood today.” Whether companies are forced to sell, whether ETFs are redeeming large amounts, and where leveraged positions are concentrated, these small numbers on the screen are often more critical than the emotions in social circles. What truly determines fate is often not the loudest slogans, but a few lines of terms written in the corner.

MSTR's statement “If the stock price remains below 1x mNAV for an extended period, we may sell Bitcoin” is just like that line. It resembles a hair strand that has been overlooked for many years, now tightening around the neck of the entire “Bitcoin Empire” little by little. The romance of capitalism will ultimately be reflected on that cold, hard ledger page.