Speculation that Strategy (MSTR) could be headed for a “death spiral” of forced bitcoin liquidations has made the rounds in recent days as the cryptocurrency tumbled towards $60,000.
On Monday, Wall Street analysts from Benchmark and TD Cowen pushed back against that narrative, defending the durability of the company’s bitcoin treasury strategy. Both firms have given Strategy (MSTR) a "buy" recommendation.
"The death-spiral story assumes that Strategy is one bad week from selling bitcoins, and it skips several steps to get there. Before any meaningful bitcoin sale by Strategy, it would need to run through the $1 billion cash reserve it has in place to fund dividend payments," Benchmark's Mark Palmer said in his research note.
Strategy sold 32 BTC for approximately $2.5 million between May 26 and May 31, the first time the firm sold any of its holdings since it began acquiring bitcoin in December 2022. The company said it sold this modest amount of BTC at an average price of $77,135 per coin to fund distributions on its preferred STRC stock, or the Strategy Variable Rate Perpetual Stretch Preferred Shares.
That said, according to Palmer, because Strategy’s perpetual preferred stocks do not have "a hard maturity" that could trigger accelerated selling, there likely won't be an uptick in sales. "The company would have to move through a long sequence of failures before its bitcoin reserve, currently valued at almost $55 billion, would even enter the conversation," Palmer said.
