Bitcoin trades below $100K while Strategy’s stock also faces volatility
Crypto markets have been facing a rough week amid rising concerns over Bitcoin’s pullback. Amidst the volatility, Michael Saylor and his firm Strategy are once again in the spotlight. Peter Schiff, a prominent gold advocate and Bitcoin critic has recently criticised Strategy’s model, highlighting the risks in it.
Schiff believes that MSTR’s entire business model is a fraud and has also challenged Saylor to debate him on this claim at the Binance Blockchain Week in Dubai this December.
Schiff argues that Strategy’s whole setup depends on income-focused investors buying its “high-yield” preferred shares. He believes that those yields will never actually be paid. Once the fund managers realise this, they will start dumping, and Strategy will no longer be able to issue more debt, which would trigger a “death spiral” for the company.
Regardless of Bitcoin’s future, Schiff is convinced that Strategy will end up bankrupt. These comments have sparked a lot of criticism from the community including Jeff Dorman, CIO of Arca.
In an X post, Dorman criticised the “stupid, inaccurate takes” about Strategy’s risk exposure. He argues that many of the claims being spread are simply wrong and can be disapproved with even a basic understanding of how corporate debt and equity work.
“He will never have to sell his BTC unless Bitcoin has already fallen so far that his selling is an irrelevant afterthought,” he said.
Dorman also notes that the belief that one person will buy forever is mistaken. He added that Saylor is no longer a marginal buyer of Bitcoin, compared to ETFs. “But MSTR selling BTC is not even remotely a concern,” he added.
Dorman explains why the Strategy is not at risk. He cites Saylor controlling about 42% of the voting power, which makes activist takeovers almost impossible.
Moreover, the company’s debt has no provisions that would force it to liquidate bitcoin, its interest payments remain low and manageable, and its core software business continues to generate cash. Dorman also points out that companies almost never fail simply because debt comes due as lenders typically extend the terms.
“If you follow anyone saying MSTR is a risk to BTC, tell them to call me,” he said .
This comes as Bitcoin continues its dip below the $100,000 mark, currently trading at $95,331. It is down 10% over the past week. Strategy’s stock also continues to face volatility amidst the recent downturn. It is currently trading at $199.75, down over 50% in the past 6 months.
Its mNAV had recently dropped below 1, but has since recovered to 1.19.
Meanwhile, Saylor has hinted in a recent post on X that the company has a “big week” ahead, suggesting that more Bitcoin purchases may be on the way. In a recent interview with CNBC, Saylor has said that the announcement would be “pleasantly” surprising.
This has added to the growing anticipation that MSTR could soon expand its already significant Bitcoin holdings.
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