With Bitcoin continuing its sharp decline, whether MSTR is forced to sell off its holdings has become a focal point.

Written by: Ye Zhen

Source: Wall Street News

Bitcoin is undergoing a severe stress test for institutional holdings. As the price falls below key psychological levels and approaches the cost line for major institutional holders such as MicroStrategy, market concerns about the liquidity of highly leveraged holders are rapidly escalating.

Over the weekend, Bitcoin plunged below the $80,000 mark, hitting its lowest level since April 7, 2025. This sell-off occurred against a backdrop of significantly insufficient market liquidity, further exacerbating Bitcoin's recent cumulative decline of over 30%.

Despite subdued market sentiment, MicroStrategy Executive Chairman Michael Saylor posted an image with the words "More Orange" on social media platform X on Sunday, hinting at continued accumulation. The company announced a 25 basis point increase in its Series A Perpetual Deferred Preferred Stock (STRC) dividend to 11.25%, aiming to attract capital at high financing costs to sustain its Bitcoin buying strategy. However, analysts point out that if the price of Bitcoin continues to stagnate or falls below its cost line, the high dividend payout could trigger a severe cash flow squeeze.

Jim Bianco, a macro strategist at Bianco Research, points out that the Bitcoin market is facing a narrative exhaustion crisis. The current market structure is highly institutionalized, with ETF investors and MicroStrategy collectively controlling approximately 10% of the circulating supply, and both currently experiencing unrealized losses. This suggests that the "institutional entry" narrative, which once supported the market, may reverse into a significant source of selling pressure after investors are trapped at high levels.

Institutional holdings are facing increasing unrealized losses, leading to a net outflow of funds from ETFs.

Jim Bianco's analysis shows that Bitcoin is becoming highly "institutionalized," meaning that for the first time, the market can clearly observe the holding costs and profit/loss of large funds. Currently, MicroStrategy and 11 spot Bitcoin ETFs collectively hold approximately 10% of the circulating Bitcoin supply, with a combined average purchase cost of approximately $85,360. At current prices, these institutional holdings are currently showing a paper loss of approximately $8,000 per coin, with total unrealized losses reaching approximately $7 billion.

Among them, spot ETFs have become a core force influencing the supply and demand structure. Data shows that the 11 largest spot Bitcoin ETFs hold 1.29 million Bitcoins, accounting for 6.5% of the total circulating supply, with a market value of approximately $115 billion. However, the average purchase cost of these ETF investors is as high as $90,200, and the current price of Bitcoin is about $13,000 lower than their cost.

This high-level buying structure has led to a typical pro-cyclical effect. Bianco points out that these ETFs have seen net outflows for 10 consecutive trading days, with investors choosing to redeem during pullbacks after buying at high levels. This funding structure is amplifying downward market volatility.

MicroStrategy's safety cushion narrows as aggressive fundraising raises concerns.

As a benchmark for corporate Bitcoin holdings, MicroStrategy's balance sheet is facing its most severe test in months. Currently, the company holds 712,647 bitcoins at an average cost of approximately $76,037. With Bitcoin's trading price falling back to around $78,000, the company's unrealized gains have narrowed significantly to less than 3%.

Despite its thinning safety cushion, MicroStrategy has shown no signs of backing down. To fund the next phase of its purchases, the company adjusted the yield on its STRC product to 11.25%, a significant premium over typical corporate bonds, reflecting the company's extreme thirst for capital and the inherent volatility risk of its centralized Bitcoin model. Data shows that since the STRC product's debut in November, its sales alone have funded the acquisition of over 27,000 bitcoins.

Analysts believe that while MicroStrategy remains profitable, its margin for error has significantly narrowed. Further price declines could lead to overall unrealized losses. Maintaining such high dividend payments could strain cash flow, especially if Bitcoin's price falls below its $76,000 cost level, making this risk particularly acute.

Old narratives are failing; the market urgently needs new drivers.

From a macro perspective, this plunge has exacerbated weeks of market disappointment. Jim Bianco believes that Bitcoin's real problem lies in the lack of a new narrative. The previously anticipated "boomer adoption" story has been fully priced in and is even being disproven.

The current market structure shows that ETFs and MicroStrategies are not only buying heavily and in concentrated amounts, but are also currently trapped overall. Bianco points out that unless a new, sustainable buying narrative emerges, the outflow trend is likely to continue. In this situation, the high-level institutional holdings that were once seen as a positive factor may instead become the biggest source of pressure on the market. The current problem with Bitcoin is not whether anyone bought it in the past, but where the next wave of buyers will come from at the current price level.