US-based software company MicroStrategy, known for its aggressive BTC investments and for managing the majority of its balance sheet with Bitcoin since 2020, announced a staggering net loss of $12.5 billion in the first quarter of 2024, largely due to the recent slump in Bitcoin prices.
Shifting BTC policy signals possible sales
Chairman of the board Michael Saylor signaled a break from MicroStrategy’s long-running “never sell” Bitcoin strategy, suggesting the company could sell BTC to instill market confidence or to generate funds for dividends if necessary. During the meeting to discuss Q1 results, Saylor stated, “We might sell a portion of our Bitcoin to provide liquidity for dividends, in a move that could help immunize the market and send a clear message.”
Saylor emphasized that both the company and Bitcoin remain resilient, adding that the sector is robust and there is no threat to global stability, despite the company’s reported losses following a 23.8% decline in BTC’s price during the quarter.
In an earlier interview with CNBC in February, Saylor said that even in the event of a sharp BTC downturn, MicroStrategy could service its debts without liquidating any of its Bitcoin holdings, and reiterated a commitment to continue acquiring BTC for the long term. He insisted the firm could meet its obligations even if Bitcoin fell as low as $8,000.
Large-scale BTC acquisitions and Stretch strategy
MicroStrategy’s Bitcoin accumulation accelerated after 2020. So far this year, the company has purchased 145,834 BTC primarily through the issuance of a perpetual preferred stock called Stretch (STRC), which pays dividends. As a result, MicroStrategy currently holds 818,334 BTC worth a total of $66.7 billion.
Saylor indicated that his ambition is for Stretch to become the world’s largest credit instrument. As assets under management grow, MicroStrategy expects rising liquidity will drive further interest and adoption of the product.
Innovation in Bitcoin-backed financial products
Recently, decentralized finance protocols such as Pendle and Saturn have started offering tokenized versions of Stretch’s monthly 11% dividend, making the product more liquid and accessible to investors. These developments have contributed to the rapid growth of the Bitcoin-collateralized lending market.
Saylor shared his belief that a new era is emerging in which neobanks will offer digital yield accounts, bringing Bitcoin-backed financial products directly to retail investors. He noted that nearly three dozen such initiatives have appeared in the past two to three months alone.
Saylor commented that Bitcoin-collateralized digital yield products may offer investors returns as high as 8%, which is higher than what most stablecoins provide.
He went on to express optimism that the Bitcoin lending market will see even more exciting developments over the coming quarter.
After the financial results were published, MicroStrategy’s shares slid 4.33% in after-hours trading, closing at $178.80.
Meanwhile, as Bitcoin surged nearly 20% since April 1 to $81,250, MicroStrategy is now preparing to deliver much stronger performance in the second quarter.
