Bitcoin continues to plummet, is MSTR forced to sell off becoming the focus?

Written by: Ye Zhen

Source: Wall Street Insights

Bitcoin is undergoing a severe stress test on institutional holdings. As the price breaks through key psychological levels and approaches the cost basis of major institutional holders like MicroStrategy, market concerns about liquidity for high-leverage holders are rapidly intensifying.

Over the weekend, Bitcoin sharply fell below the $80,000 mark, hitting its lowest level since April 7, 2025. This round of selling occurred amid significantly liquidity-constrained markets, further exacerbating Bitcoin’s recent cumulative decline of over 30%.

Despite the bearish market sentiment, MicroStrategy Executive Chairman Michael Saylor still 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 the dividend rate for its Series A perpetual preferred stock (STRC) to 11.25%, aiming to attract capital at high financing costs to sustain its Bitcoin purchasing strategy. However, analysts point out that if the price remains stagnant or falls below their cost basis, the high dividend payouts could trigger severe cash flow pressures.

Bianco macro strategist Jim Bianco analyzed that the Bitcoin market is facing a narrative exhaustion crisis. The current market structure is highly institutionalized, with ETF investors and MicroStrategy controlling approximately 10% of the circulating supply combined, and the overall position is currently at a loss. This indicates that the previously supportive “institutional entry” narrative may reverse into a significant selling pressure after being trapped at high levels.

Increasing Unrealized Losses in Institutional Holdings, ETF Net Outflows Now

Bianco’s analysis shows that Bitcoin is becoming highly “institutionally accountized,” meaning the market can now clearly observe the cost basis and profit/loss status of large holdings. Currently, MicroStrategy and 11 spot Bitcoin ETFs hold about 10% of the circulating Bitcoin, with an average purchase cost of approximately $85,360. Based on current prices, these institutional holdings are collectively unrealized at a loss of about $8,000 per Bitcoin, with total unrealized losses reaching approximately $7 billion.

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

This high-positioning structure leads to a typical pro-cyclical effect. Bianco pointed out that these ETFs have experienced net outflows for 10 consecutive trading days, as investors are redeeming during retracements after buying at high levels. This capital structure is amplifying downward market volatility.

MicroStrategy’s Safety Buffer Narrows, Aggressive Financing Raises Concerns

As a flagship corporate Bitcoin holder, MicroStrategy’s balance sheet is facing its most severe test in months. The company holds 712,647 Bitcoins, with an average cost of about $76,037. As Bitcoin’s trading price falls back to around $78,000, the company’s unrealized gains have significantly narrowed to less than 3%.

Despite the thinning safety buffer, MicroStrategy shows no signs of retreat. To fund the next phase of purchases, the company has adjusted the yield on its STRC product to 11.25%, a return rate that carries a huge premium over typical corporate bonds, reflecting the company’s extreme capital appetite and the inherent volatility risk of its Bitcoin-centric model. Data shows that since the STRC product first launched in November, its sales alone have funded the acquisition of over 27,000 Bitcoins.

Analysts believe that MicroStrategy remains profitable but has significantly reduced its tolerance for losses. If prices continue to fall, the company will face overall unrealized losses. Maintaining such high dividend payments could cause cash flow strain, especially if Bitcoin prices drop below its $76,000 cost “waterline,” making this risk particularly acute.

Old Narratives Fail, Market Urgently Needs New Drivers

From a macro perspective, this plunge has intensified the disappointment that has built over several weeks. Jim Bianco believes that Bitcoin’s real problem lies in the lack of new narratives. The previously highly anticipated “Old Money Entry” (Boomer Adoption) story has been fully priced in and is even being discredited.

The current market structure shows that ETFs and MicroStrategy are not only buying heavily and concentrated but are also currently trapped at high levels. Bianco points out that without new, sustainable buying narratives, the trend of capital outflows may continue. In this context, the once-positive high-level institutional holdings could turn into the market’s biggest pressure source. Bitcoin’s current problem isn’t about whether people bought in the past, but where the next wave of buyers will come from at the current price levels.