Bitcoin Plummets 21% Amid Strategy's Debt Buyback Concerns
Bitcoin fell 21% after Strategy’s debt buyback news— Is a Terra Luna-style doom loop next?
Image: Cointelegraph
Bitcoin's price dropped 21% following Strategy's announcement of a debt buyback, raising fears of potential liquidation of its BTC holdings. Despite short-term liquidity pressures, Strategy's conservative leverage ratio may prevent forced sales. A rally above $70,000 seems unlikely as long as its preferred stock trades below $100.
- 01Bitcoin retested the $61,000 mark for the first time in 4 months after a 21% price correction.
- 02Strategy has accumulated 126,016 BTC for $9.31 billion but paused further purchases to buy back $1.38 billion in debt.
- 03The company's cash reserves have dwindled to $900 million, sufficient for only 6 months of dividend payments.
- 04Strategy's 11% net leverage indicates a conservative financial position, reducing the risk of forced liquidations.
- 05Concerns remain over a potential 'doom loop' that could deter buyers if Strategy is perceived as a large seller in the market.
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Bitcoin (BTC) experienced a significant decline of 21% over ten days, falling to around $61,000, following Strategy's (MSTR US) decision to pause its Bitcoin purchases in favor of a $1.38 billion debt buyback. This move raised concerns among traders regarding the possibility of forced liquidations of Strategy's Bitcoin holdings. Despite these fears, Strategy's conservative net leverage of 11% suggests it may not be in immediate danger of having to liquidate its assets. The company has accumulated 126,016 BTC for $9.31 billion, but its cash reserves have decreased to $900 million, enough to cover dividends for only six months. Analysts warn of a potential 'doom loop' in the market, where the fear of a large seller could prevent buyers from entering. As long as Strategy's preferred stock trades below $100 and spot exchange-traded funds (ETFs) continue to sell, the likelihood of Bitcoin rallying above $70,000 remains low.
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The decline in Bitcoin's price could affect investors' confidence and trading activity in the cryptocurrency market.
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