Will MicroStrategy face bankruptcy liquidation? Depth analysis of its financial situation and risks

MicroStrategy(, as the world's largest Bitcoin holding company, is closely related to the financial condition and Bitcoin prices. This article will analyze MicroStrategy's financial situation from multiple perspectives and assess the risks it may face.

MicroStrategy's Bitcoin Holding Strategy

As of the end of 2024, MicroStrategy holds approximately 471,107 bitcoins, with a total cost of about $27.97 billion, and an average purchase cost of about $62,500 per coin. The market value of these bitcoins at the end of 2024 is approximately $41.79 billion.

MicroStrategy primarily raises funds to purchase Bitcoin through the following methods:

1. Use own funds ) of approximately 500 million USD (
2. Issue Convertible Preferred Bonds
3. Issue Priority Guaranteed Bonds
4. Market Price Issuance of Stocks

Currently, MicroStrategy's total liabilities amount to $8.213 billion, total asset market value is $43 billion, and the leverage ratio is 19%. The price of Bitcoin needs to drop below $16,500 and stay there until 2028 or even longer for MicroStrategy to become insolvent.

![Will MicroStrategy be bankrupted and liquidated as Bitcoin prices continue to plummet?])https://img-cdn.gateio.im/webp-social/moments-a3a2f6ac7820f362123606e1bd82e1c9.webp(

The Impact of Bitcoin Price Volatility on MicroStrategy

Short-term impact:

• A decline in Bitcoin will lead to companies recognizing impairment losses, affecting their financial report performance.
• Stock prices are highly correlated with Bitcoin, which may affect the company's financing ability.

Long-term impact:

• If Bitcoin remains sluggish in the long term, the company may face serious financing pressure.
• Company operations highly rely on the capital markets, and investors may reduce support or demand higher financing costs.
• Bitcoin staying below the average buy-in price for a long time may affect investor confidence.

Key Financial Data Analysis

Bitcoin Holdings and Valuation:

• Holds a book value of approximately 23.9 billion USD in Bitcoin, with a market capitalization of about 41.79 billion USD.
• If Bitcoin falls below $30,000, the company needs to make further impairment provisions.

Debt Level:

• Total debt of approximately $8.2 billion, mainly in convertible bonds, with a low coupon rate.
• Some bonds may be converted into stocks, and the short-term debt risk is relatively low.

Cash Flow and Liquidity:

• In 2024, the net cash outflow from operations is $53 million, with cash reserves of only $46.8 million.
• Raised $15.1 billion by issuing additional shares, but future financing capacity may be affected.

Profitability:

• Software business revenue growth stagnates, down 3% year-on-year in 2024.
• Profit mainly relies on the paper gains from Bitcoin investments, which are highly volatile.

![Will the continuous plummet of Bitcoin prices lead to MicroStrategy's bankruptcy liquidation?])https://img-cdn.gateio.im/webp-social/moments-7839f57d90a301735dc26c2772107a99.webp(

Correlation between Stock Price Trends and Bitcoin

• The correlation between MicroStrategy's stock price and Bitcoin price reaches 0.7-0.8
• The volatility of stock prices is usually greater than that of Bitcoin itself.
• Market valuations are usually higher than the net value of holding Bitcoin, but the premium may disappear during downturns.

The Possibility of Bankruptcy or Financial Crisis

In the short term, MicroStrategy still has strong debt repayment ability, but a long-term bear market may lead to financial difficulties:

• Debt-to-Asset Ratio: Currently, assets far exceed liabilities, but a drop in Bitcoin to $12,000 - $15,000 could trigger technical bankruptcy.
• Debt Maturity Risk: Over $4 billion in debt will mature between 2027 and 2029. If refinancing is not possible, it may be necessary to sell Bitcoin to repay the debt.
• Management stance: The founder holds 46.8% of the voting rights, which can prevent the sale of Bitcoin or changes in strategy.

![Will MicroStrategy go bankrupt due to the continuous plummet of Bitcoin prices?])https://img-cdn.gateio.im/webp-social/moments-2901f5086b67261660f4725a744a28e6.webp(

Conclusion

MicroStrategy currently maintains financial stability, but if Bitcoin experiences a long-term depth decline, its high leverage strategy may lead to severe financial pressure. The company's fate is entirely dependent on Bitcoin's future trend—long-term stagnation could lead to a debt crisis or even bankruptcy; sustained growth will maintain strong growth.