Bitcoin Holder Strategy Unveils Novel Credit Rating System
Strategy, the world's largest corporate Bitcoin holder, has introduced a new credit rating dashboard based on its preferred stock notional value. The company asserts that it possesses sufficient reserves to continue dividend payments for at least another 70 years, even if the price of Bitcoin remains stagnant.
Financial Projections and Debt Servicing Capabilities
According to Strategy's statements on Tuesday, even if Bitcoin were to decline to an average cost basis of $74,000, the company would still have 5.9 times the assets to cover its convertible debt, a metric they refer to as the BTC Rating for their debt. In a scenario where Bitcoin's price drops to $25,000, this ratio would be 2.0x.
Addressing Investor Concerns Amidst Market Volatility
This development occurs at a time when investors are increasingly concerned that a decline in cryptocurrency prices could compel large digital asset treasury companies into liquidation, potentially exacerbating downward pressure on an already fragile market. However, Strategy's dividend runway and the cash flow generated from its enterprise software are significantly mitigating liquidation risks for the company, according to Lacie Zhang, a research analyst at Bitget Wallet.
Expert Analysis on Strategy's Financial Resilience
Zhang considers Strategy's claim of a 71-year dividend runway to be realistic within a scenario of a flat Bitcoin price. Nevertheless, she notes that long-term projections are subject to various uncertainties, including market volatility and potential regulatory changes. Zhang expressed that she is not particularly concerned about near-term liquidations for the leading corporate Bitcoin holder, citing their diversified funding and holding strategies as positioning them favorably for sustained growth.
Impact on Industry Stability and Institutional Adoption
Strategy's consistent accumulation of Bitcoin has played a role in fostering broader industry stability and has supported deeper institutional adoption. Furthermore, Strategy's capacity to avoid forced selling could potentially help Bitcoin maintain key psychological price levels during future market downturns, according to Ki Young Ju, founder and CEO of CryptoQuant.
Strategic Holdings as a Buffer Against Bear Markets
Ju highlighted that Strategy's robust financial standing serves as a positive indicator for the upcoming Bitcoin bear market, as the world's largest corporate holder is unlikely to divest its holdings. He suggested this could prevent Bitcoin from falling back to its realized price of approximately $56,000 during the next crypto bear market, given that entities like Strategy are expected to hold their positions, effectively removing those coins from active trading circulation. Ju shared these insights in an X post on Friday.
Comparison with Other Digital Asset Treasury Companies
Several prominent digital asset treasuries have experienced substantial stock market crashes and significant declines in their market net asset value (mNAV). These include companies such as Bitmine, Metaplanet, Sharplink Gaming, Upexi, and DeFi Development Corp, alongside Strategy. The mNAV ratio is used to compare a company's enterprise value with the value of its cryptocurrency holdings.
Implications of mNAV Ratio for Capital Raising
An mNAV ratio below 1 generally makes it more challenging for companies to raise capital by issuing new shares, which could consequently limit their ability to acquire more cryptocurrency. At the time of writing, Strategy's mNAV stood at 1.16, indicating that the company could still theoretically issue new shares to secure additional funding.