MicroStrategy (now Strategy), the corporate intelligence company, is having operational challenges right now.

From their November top of $475, its shares have dropped more than 55%. This has raised doubts about their creative Bitcoin-centric business plan.

MicroStrategy (NASDAQ:MSTR), the corporate intelligence company, is currently facing operational difficulties. Since November, when it reached a peak of $475, the company’s shares have plummeged by over 55%.

This downturn has brought renewed scrutiny to MicroStrategy’s unique Bitcoin-centric business plan. With Bitcoin itself now falling to as low as $86,000 following a 9% decline, market observers are raising questions about the long-term sustainability of MicroStrategy’s strategy, considering the cryptocurrency has lost more than $10,000 in the past 24 hours.

MicroStrategy: A Different Approach

MicroStrategy’s approach is largely defined by an ambitious plan that has seen the company transform from a conventional software organization into a Bitcoin powerhouse. To date, the corporation has acquired 499,096 BTC for a total of $43.7 billion. Earlier this month, the company issued fresh debt for $2 billion, bringing the average cost per Bitcoin to $66,350.

This aggressive acquisition strategy involves MicroStrategy borrowing through 0% convertible notes, using the funds to purchase Bitcoin, which in turn drives up prices. Subsequently, the company sells new shares and uses the proceeds to acquire even more Bitcoin. This cycle has thus far been profitable for MicroStrategy, but the prevailing market conditions could pose a challenge to the persistence of this model.

MicroStrategy liquidation: A closer look

As MicroStrategy, $MSTR, falls over -55%, many are asking about “forced liquidation.”

The company now holds $44 BILLION worth of Bitcoin, could they be forced to sell it?

Is liquidation even possible? Let us explain.(a thread) pic.郵便番号

— The Kobeissi Letter (@KobeissiLetter) February 25, 2025

Liquidation Concerns Arise But Seem Unlikely

According to research by The Kobeissi Letter, MicroStrategy would be vulnerable to liquidation pressure should Bitcoin’s price fall below $66,000 and remain at that level. This critical level corresponds to the company’s average acquisition cost. However, several factors suggest that liquidation, despite the potential, is unlikely even amid the current market volatility.

MicroStrategy holds $8.2 billion in debt against $43.4 billion worth of Bitcoin, providing a substantial cushion. Moreover, a vast majority of the company’s convertible notes mature in 2027, granting MicroStrategy ample time to navigate short-term market fluctuations. Since embarking on its Bitcoin strategy in August 2020, the company has encountered several significant price corrections but has consistently maintained its cryptocurrency holdings.

Today’s Bitcoin market has more institutional support than during past “crypto winters.” The current ecosystem boasts stronger fundamentals, and large businesses are incrementally introducing Bitcoin into their reserves.

Just recently, Rezolve AI announced plans to invest $1 billion in Bitcoin, having already allocated $100 million. Meanwhile, several countries are adopting similar investment methods, which in turn encourages greater participation in cryptocurrency purchases. These shifts in the market’s structure suggest that Bitcoin may exhibit more resilience than it did during previous downturns, potentially lending credence to MicroStrategy’s long-term vision.

Despite predictions of further declines by BitMEX co-founder Arthur Hayes, the outlook for the world’s most popular cryptocurrency remains optimistic, especially considering it previously reached all-time highs above $109,000.

MicroStrategy’s history of holding through cycles and structuring debt with distant maturities shields it from immediate liquidation pressure. However, the falling price of its shares limits flexibility and keeps its controversial model under strain.