Strategy's paper profit on Bitcoin nearly wiped out overnight on November 4. BTC fell to $75,653. That is just $202 above the average price at which the company accumulated its coins.
Strategy is the former MicroStrategy, Michael Saylor's company. It is the world's largest corporate holder of Bitcoin: 849,327 coins worth $64.08 billion on its balance sheet. The profit cushion on this entire position shrank to $171.6 million, or 0.27%.
Why this matters to a trader. MSTR stock has long traded as a bet on Bitcoin. When the cushion on the coins melts away, the market starts testing whether the company can withstand a drawdown.
How close was zero?
- $75,451 - Strategy's average entry price per coin
- $75,653 - BTC's low, hit at 06:09 MSK
- $171.6 million - the entire paper profit on a $64.08 billion position
- $78,195 - price by evening, the gap widened to roughly $2.33 billion, or 3.64%
The company disclosed the entry price itself. It is stated in the 8-K report dated November 2. An 8-K is a mandatory reporting form for the U.S. Securities and Exchange Commission.
Is the company facing forced selling?
No. The report contains no debt covenants tied to the Bitcoin price. The company will not have to sell coins at creditors' demand.
The compression itself took hours. As recently as November 2, at a price of $77,567, the cushion was about $1.8 billion. Over the month, Bitcoin lost 9.38%.
What is happening with the stock and purchases?
- MSTR stock rose. On Wednesday the shares gained 4.03%, to $141.09 (+$5.46 as of 17:50 MSK).
- Market cap is $59.63 billion. That is below the value of the coins themselves on the balance sheet.
- The new tranche is in the red. From October 26 to November 1, Strategy bought 811 BTC for $65.5 million at an average price of $80,846. The tranche is now losing 3.28%, about $2.15 million in paper loss.
- The money came from selling stock. The company sold 1,178,552 MSTR shares for $164 million net, and kept $98.5 million of that in dollars.
Where is the bulk of the money going?
$208.2 million went to buying back STRC preferred stock. That is 3.2 times more than was spent on Bitcoin in the same week. They repurchased 2,092,035 shares at $99.52 against a $100 par value: Saylor promised to keep the stock at or above par.
Key point: in total, $273.7 million left the balance sheet against $164 million raised, a net minus of $109.7 million. The remaining buyback allowance is $748.6 million for preferred stock and $1 billion for MSTR.
It is convenient to check upcoming BTC moves against macro event dates in the economic calendar, and to pick a crypto trading plan via the challenge calculator.
Did you see that overnight BTC candle?
A three-thousand-dollar plunge overnight and a return by evening stick in the memory for a long time. Only for Saylor, $64 billion is at play on this move. For a private trader, it is a deposit where the percentage of the move is measured in cups of coffee. The challenge - funded account - payout path is exactly about how to get a working trading nominal without comparable equity of your own. It is calmer to work it out in advance.