Bitcoin crash wipes out $14.5 billion of strategy's holdings

Michael Saylor's Bitcoin-holding company Strategy Inc. has taken a massive hit due to the cryptocurrency's steep decline in value. The firm recorded an unrealized loss of approximately $14.5 billion in the first quarter, largely driven by the 20%+ drop in Bitcoin's value.

Strategy's bitcoin reserves now below cost basis

Strategy, which has over 50,000 bitcoin worth more than $50 billion in its reserves, saw its holdings lose significant value as Bitcoin's price tumbled below its average cost basis. The company's strategy of buying and holding onto bitcoin has been disrupted, making it harder to maintain its model.

To fund further bitcoin purchases, Strategy is increasingly relying on its preferred stock, Stretch, which avoids diluting existing shareholders but comes with a fixed obligation to pay dividends. Saylor is adapting his approach to market conditions and investor demand.

For Strategy's model to remain sustainable, Bitcoin needs to appreciate faster than the company's growing obligations. Fortunately, the firm currently has a cash reserve of $2.25 billion, enough to cover interest and distributions for over two years.