Brutal Test for the World’s Largest Bitcoin Company: What Happens if 115,000 BTC Are Sold?

A three-year stress test conducted by analyst Adam Livingston revealed that MicroStrategy (MSTR) would not go bankrupt in the event of a potential Bitcoin crash, but the amount of Bitcoin per share could decrease significantly.

As the world’s largest corporate Bitcoin (BTC) investor, MicroStrategy is frequently a topic of debate regarding its resilience to sharp market fluctuations. Analyst Adam Livingston worked on a scenario he characterized as “brutal” to test the company’s financial structure. In this model, worst-case possibilities were evaluated, such as a sharp drop in Bitcoin prices in a short period, the closing of capital markets, and the company being forced to sell assets to pay its debts.

According to Livingston’s model, if the Bitcoin price drops to $26,611 in the sixth month, the company’s net asset value multiplier falls below 0.50. In this case, MicroStrategy is forced to use its assets to fulfill its debt obligations. With cash reserves projected to run out in the ninth month, it is predicted that the company would need to sell a total of 115,727 BTC within three years.

Bankruptcy Risk or Value Loss for MicroStrategy?

The analysis results show that the company will not enter a “death spiral” or suddenly go bankrupt. However, the biggest risk stands out as the massive dilution in the amount of Bitcoin per share. In the model, the value per common share drops from 138,161 satoshis to as low as 7,884 satoshis, and the share price falls to the $1.01 level.

Despite all this negative outlook, at the end of the three-year period, MicroStrategy still continues to hold 731,636 BTC. Livingston states that this situation proves the company’s fundamental structure is more resilient than thought. It is emphasized that the main point for investors to watch is not the total collapse of the company, but this significant compression in the amount of assets per share.