Can MicroStrategy's Bitcoin Bet Survive a Market Downturn? What Experts Say

The Risk Scenario

MicroStrategy currently holds 650,000 Bitcoin—approximately 3.1% of total supply, worth roughly $60 billion at current prices ($95.47K). Yet the company’s stock price has tumbled 30% in the past month to $185.88, with MSTR down 65% from its November 2024 peak, while Bitcoin itself has declined just 6% over the same period. This divergence has raised questions about whether the firm’s concentrated bet represents an existential risk or a calculated long-term strategy.

Recent developments have intensified concerns: regulatory discussions about potential removal from major indices, combined with CEO Michael Saylor’s acknowledgment that the firm might need to sell Bitcoin if market conditions deteriorate further, have sparked debate across the investment community. The company’s market-adjusted net asset value (mNAV) currently sits at 1.14—still above the critical 1.0 threshold that would trigger forced asset liquidation.

The “Too Big To Fail” Debate

Industry observers are divided on whether MicroStrategy enjoys insulation from catastrophic collapse. Corporate lawyer Eli Cohen, general counsel at blockchain infrastructure firm Centrifuge, pointed to historical precedent: “Public companies can and do completely implode. Enron and Lehman Brothers are the most famous examples. More recently, Silicon Valley Bank, Silvergate, and Signature—all publicly traded institutions—went bankrupt with equity holders getting wiped out entirely.”

As the world’s 433rd largest company by market cap, MicroStrategy does command institutional attention. Some proponents argue this scale provides protection—that policymakers or market participants would step in to prevent a cascading failure of such magnitude. However, this assumption faces scrutiny.

The Bailout Question

The 2008 financial crisis introduced the concept of “too big to fail,” when major financial institutions received emergency support. Similar dynamics were once expected to protect crypto exchange FTX, yet that company collapsed spectacularly, along with hedge fund Three Arrows Capital.

Trantor, head of decentralized exchange Etherex, disputes the bailout thesis: “MicroStrategy doesn’t have the same vital connections to the financial system as large banks, despite what some believe. No one will bail them out.” Eli Cohen concurred: “If MSTR goes bust, equity holders will lose most or all of their investments. Any recovery will take years.”

The Liquidity Crunch Threat

Sal Ternullo, who co-led cryptoasset services for KPMG when it audited MicroStrategy in 2020, identified the real vulnerability: “The danger is a liquidity crunch. If a company lacks cash reserves to buy back stock when it trades at a discount, and that discount persists while cash is scarce, shareholders will eventually pressure management to liquidate balance sheet assets.”

Saylor previously stated the firm could sell Bitcoin if mNAV dropped below 1.0—a prospect that terrifies markets given MSTR’s 3.1% supply concentration. To mitigate this risk, the company recently established a $1.44 billion cash reserve for dividends.

Market Contagion Risk

Katherine Dowling, general counsel and COO at Bitwise Asset Management, acknowledged both the company’s strong fundamentals and the inherent volatility of a concentrated Bitcoin strategy. However, forced Bitcoin sales by MSTR would likely trigger cascading market effects.

Trantor warned: “Any decision to sell BTC would lead to very negative market responses and increased front-running through selling and short activity. While total price collapse is unlikely, the market is hunting for the next Terra Luna or FTX-style failure, and this would feed into that bearish confirmation bias.”

The Verdict

Mitchell Rudy, board member at Bonk Inc., suggested failure is “unlikely but possible,” noting the firm has “enough inertia to survive” despite being a target for institutional pressure. Yet the consensus among financial law experts remains stark: scale alone is no guarantee of survival in the modern financial system.