Strategy (MSTR) Stock: Bitcoin Gamble Faces First Major Test as Prices Sink
TLDR
Strategy reports $5.91 billion in unrealized Bitcoin losses for Q1 2025
The company holds 528,185 Bitcoin acquired at an average price of $67,485 per coin
Strategy warns its analytics software business may not generate enough cash to meet financial obligations
The firm has taken on $8.2 billion in debt for Bitcoin purchases
Bitcoin price dropped to around $78,200-$79,300, a five-month low
Strategy, formerly known as MicroStrategy, announced on Monday that it does not expect to report a profit for the first quarter of 2025. The company cited $5.91 billion in unrealized losses on its massive Bitcoin holdings as the primary reason.
The Tysons, Virginia-based firm disclosed this information in a filing with the Securities and Exchange Commission. The company noted that a $1.69 billion tax benefit should partially offset these paper losses.
“We may not be able to regain profitability in future periods, particularly if we incur significant unrealized losses related to our digital assets,” Strategy stated in the filing.
Bitcoin Holdings and Recent Purchases
As of March 31, 2025, Strategy holds 528,185 Bitcoin. This massive crypto treasury is currently valued at approximately $41.3-41.8 billion.
The company did not purchase any additional Bitcoin over the past week. This pause comes after an aggressive buying spree in the first quarter.
During Q1 2025, Strategy spent $7.7 billion acquiring Bitcoin at an average price of around $95,000 per coin. In late March alone, the company purchased about 22,000 Bitcoin at an average price of $87,000 each.
Since beginning its Bitcoin investment strategy in 2020, the company has spent a total of $35.6 billion on the cryptocurrency. The average purchase price across all acquisitions stands at $67,485 per Bitcoin.
Despite current market conditions, Strategy remains up approximately 16.5% on its overall Bitcoin investment based on current prices.
Market Conditions and Financial Challenges
Bitcoin has faced challenging market conditions recently. The cryptocurrency has dropped below the $80,000 support level to a five-month low.
At the time of reporting, Bitcoin was trading between $78,200 and $79,300. This represents a decline of over 4% in just 24 hours.
The recent market downturn coincides with new tariffs implemented by U.S. President Donald Trump, which have negatively impacted risk-on assets like cryptocurrencies.
Strategy’s financial position raises some concerns for investors. The company has accumulated $8.2 billion in debt to fund its Bitcoin purchases.
The firm has issued various financial products including convertible debt and preferred stock. Between its “Strife” and “Strike” offerings, Strategy must pay $146 million in annual dividends.
Business Outlook and Strategy
Before transforming into a Bitcoin-focused company, Strategy was primarily known for its enterprise analytics software business. However, this core business “has not generated positive cash flow” in recent periods.
The company warned that its software division may not help it satisfy its financial obligations going forward. This places additional pressure on the success of its Bitcoin strategy.
To meet its financial commitments, Strategy plans to take on more debt, issue common shares, or conduct additional offerings of preferred stock and convertible debt.
The company also faces tax liabilities of approximately $2.28 billion related to unrealized gains on its Bitcoin holdings. These are partially offset by deferred tax assets such as net operating losses.
Strategy hasn’t reported a profitable quarter since Q4 2023, when it posted earnings per share of $0.32 on $124 million in revenue.
On Monday, Strategy shares fell 10.6% to $262. While significantly below last year’s peak of $543, the stock remains above its Election Day price of $233.
Year-to-date, Strategy stock has dropped approximately 7%, with shares trading around $279 as of the most recent report.
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Filed under: News - @ April 8, 2025 7:11 am