“Michael Saylor can’t afford a bitcoin bear market”

MicroStrategy (MSTR) has become one of the most traded stocks on the market thanks to its bitcoin (BTC) investment strategy.

However, behind the success of Michael Saylor, its president, lies a monumental challenge: maintaining stability in a market known for its high volatility.

Since MicroStrategy fully opted for bitcoin, taking on debt, its trajectory has been linked to the price of the crypto asset.

Last week, bitcoin has been close to touching the long-awaited mark of $100,000 per unit, however, it has not been able to meet.

For its part, the price of MSTR shares hit all-time high on Thursday of last week when it reached $544 per share. In the current day the price has fallen to $398, as seen in the TradingView chart.

With each new BTC purchase, the company’s average acquisition price increasesand their risk exposure in the event of a bear market intensifies, says market analyst and operator, James Foord.

Yesterday, November 25, MicroStrategy announced a new purchase of 55,500 BTC. The company invested $5.4 billion in this purchase, with an average price of $97,862 per BTC. In this way, it already accumulates 386,700 BTC.

Currently, the average bitcoin purchase price for MSTR is just below $50,000 per coin, a level that could become a problem if market history repeats itself. For this reason, “Michael Saylor cannot afford a bitcoin bear market,” highlights the analyst.

A high risk bet

Michael Saylor, a well-known bitcoin advocate, has made no secret of his ambitious goals for the digital asset.

According to the businessman, the price of bitcoin could oscillate between three hypothetical scenarios: a bearish case with a price of 3 million dollars per coina base case of 13 million dollars, and a bullish one that would lead BTC to reach 49 million dollars, a fact reported by NoticiasVE.

However, James Foord warns that before these scenarios can materialize, BTC will face typical market cycles. «An average bear market could reduce the price of bitcoin by up to 75%. If this happens, MSTR could find itself in serious financial trouble,” says Foord.

The next bear market could manifest around 2025, based on bitcoin’s historical patterns. If the BTC price falls below MSTR’s average purchase by then, the company’s stock would also take a significant hit, he notes.

The weight of convertible notes

MicroStrategy has financed its aggressive acquisition of bitcoin through convertible notes, financial instruments that allow investors to convert debt into company shares.

Nevertheless, This mechanism is only viable if MSTR shares remain above the conversion priceestimated at around $200 per share, Foord says.

The specialist highlights that, if the company needs to settle these notes in cash, it would need to raise nearly $4 billion. Currently, MicroStrategy has just $46 million in cash.

“Eventually, MSTR would be forced to find financing, which could be difficult, or issue more capital,” explains the analyst.

Michael Saylor has an optimistic long-term outlook. He projects a 29% compound annual return for bitcoin over the next 21 years, arguing that volatility will decrease as the market matures. However, the short term presents significant challenges.

“As MSTR’s average bitcoin purchase price increases, so does the risk of bear markets causing significant depreciation.”

James Foord, market analyst and operator.

This scenario could lead shareholders to sell their positions, further complicating the company’s financial situation.

Where is MicroStrategy headed?

Yes ok Foord doesn’t think MicroStrategy “is at risk of bankruptcy or anything like that”warns that investors should prepare to “be in for a wild ride.”

“In the long term, bitcoin is an excellent asset to protect against increased global liquidity,” he explains.

However, he points out that liquidity is cyclical and 2025 could mark the beginning of a tightening in economic conditions, which could amplify the risks of Saylor’s strategy.

For MicroStrategy, success or failure will depend on Michael Saylor’s ability to navigate market cycles without succumbing to the risks inherent in your approach. In a bear market, challenges will be inevitable, and Saylor will have to prove that his long-term vision can weather the short-term storms.