On-chain data analysis company Centora (formerly IntoTheBlock) has released a report analyzing potential risk factors that Michael Saylor's strategy may face while regularly purchasing large amounts of Bitcoin.
The strategy purchased 4,020 BTC for approximately $427.1 million at a point when Bitcoin price reached $106,237 this week. As a result, the strategy's total Bitcoin holdings increased to 580,250 BTC (approximately $6.141 billion).
The strategy has been purchasing Bitcoin almost every week this year. In mid-May, it bought 7,390 BTC for $764.9 million, and at the beginning of this month, it additionally purchased 13,390 BTC for $1.34 billion.
The company is raising funds for these purchases through convertible bonds and stock issuances of MSTR, STRK, and STRF. Since starting Bitcoin purchases in August 2020, MSTR stock has risen by approximately 2,930%, and in recent months, it has recorded over 63% excess returns compared to Bitcoin.
However, Centora analysts pointed out that the strategy's Bitcoin holding and purchasing approach could face significant challenges in the medium to long term. The report warned that a sharp Bitcoin price drop could result in substantial losses.
Additionally, they noted that holding 2.76% of the total Bitcoin supply exposes the company to asset concentration risk, and MSTR stock shows a high correlation (0.8) with Bitcoin, meaning MSTR would also be impacted during a Bitcoin decline.
Furthermore, the strategy of purchasing through debt could lead to liquidity issues or bankruptcy in the event of a Bitcoin crash or interest rate increases. Shareholder value dilution and market influence risks were also cited as major risk factors.
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