In Q1 2025, Strategy reported a staggering $5.91 billion unrealized loss on its Bitcoin holdings, primarily due to a significant drop in Bitcoin's price. Consequently, the company's stock plummeted by 6.3% following the announcement and has declined 41.9% since November 2024, underperforming both Bitcoin and the S&P 500 .
The Financial Accounting Standards Board's (FASB) new guidelines now allow companies to reflect the real-time market value of their digital assets. While this benefited companies like Tesla, it poses a significant risk for Strategy. With billions in unrealized Bitcoin gains, the company could face a substantial tax bill under the Corporate Alternative Minimum Tax introduced by the Inflation Reduction Act. This tax, set at 15%, could result in billions in liabilities starting in 2026, potentially forcing Strategy to liquidate some of its Bitcoin holdings to meet tax obligations .
Despite its significant Bitcoin holdings, Strategy's market capitalization stands at about $95 billion, double the value of its Bitcoin assets (currently around $50 billion in BTC). This discrepancy suggests that investors are paying a hefty premium for exposure to Bitcoin through Strategy, rather than purchasing the cryptocurrency directly or through other financial instruments. Analysts warn that this overvaluation could be unsustainable, especially if Bitcoin's price experiences further volatility .
Strategy's approach of continuously issuing debt and equity to fund Bitcoin purchases has been likened to a high-risk financial flywheel. Critics argue that this strategy is unsustainable and could collapse if Bitcoin's price declines or if the company faces regulatory scrutiny. Furthermore, co-founder Michael Saylor's past controversies, including a $40 million tax fraud settlement, add to the ethical concerns surrounding the company's leadership .
The Financial Accounting Standards Board's (FASB) new guidelines now allow companies to reflect the real-time market value of their digital assets. While this benefited companies like Tesla, it poses a significant risk for Strategy. With billions in unrealized Bitcoin gains, the company could face a substantial tax bill under the Corporate Alternative Minimum Tax introduced by the Inflation Reduction Act. This tax, set at 15%, could result in billions in liabilities starting in 2026, potentially forcing Strategy to liquidate some of its Bitcoin holdings to meet tax obligations .
Despite its significant Bitcoin holdings, Strategy's market capitalization stands at about $95 billion, double the value of its Bitcoin assets (currently around $50 billion in BTC). This discrepancy suggests that investors are paying a hefty premium for exposure to Bitcoin through Strategy, rather than purchasing the cryptocurrency directly or through other financial instruments. Analysts warn that this overvaluation could be unsustainable, especially if Bitcoin's price experiences further volatility .
Strategy's approach of continuously issuing debt and equity to fund Bitcoin purchases has been likened to a high-risk financial flywheel. Critics argue that this strategy is unsustainable and could collapse if Bitcoin's price declines or if the company faces regulatory scrutiny. Furthermore, co-founder Michael Saylor's past controversies, including a $40 million tax fraud settlement, add to the ethical concerns surrounding the company's leadership .
Trade closed: stop reached
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Didn't expect this to get so much traction. Looks like this stock has a lot of die hard fans! Wish you all the best of luck!Note
Check out my new thesis here!
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.