No, Strategy is not going to sell its bitcoin, Bitwise CIO believes

Bitwise Chief Investment Officer Matt Hougan pushed back against a growing narrative that Strategy (formerly MicroStrategy) could be compelled to sell its bitcoin holdings, calling the premise "just flat wrong" and arguing that neither index changes nor market pressure creates any such requirement.

In a note to clients late Wednesday titled "No, Virginia, Strategy Is Not Going To Sell Its Bitcoin," Hougan addressed two questions he says have flooded his inbox: whether Strategy will be removed from MSCI indexes, and whether such a move could force the firm to unwind its multi-billion-dollar bitcoin position.

Hougan acknowledged that MSCI is actively considering excluding digital asset treasury companies from its investable indexes, with a decision due Jan. 15. JPMorgan recently estimated that such a removal could trigger up to $2.8 billion of passive selling of Strategy stock. Hougan estimated a 75% chance that Strategy gets booted.

Still, Hougan said history suggests index inclusions and deletions have far less impact than investors fear, noting that Strategy's addition to the Nasdaq-100 last year required funds to buy $2.1 billion of shares and "its price barely moved." He added that Strategy's recent decline since Oct. 10 is likely the market pricing in the possibility of removal and that he does not expect "substantial swings either way."

The larger concern among investors, Houdan said, is that a removal could spark a downward spiral: MSCI exclusion drives the stock lower, the share price drops well below net asset value, and Strategy is forced to sell bitcoin to stabilize its financial position.

Hougan argued this chain of reasoning is unfounded. Even if the stock trades below NAV, "there is nothing about MSTR's price dropping below NAV that will force it to sell." The company faces two obligations on its debt — interest payments of roughly $800 million a year and the need to handle maturities as they arise — but neither creates imminent pressure.

Strategy's $1.44 billion USD reserve

On Monday, Strategy disclosed it had purchased another 130 BTC for approximately $11.7 million at an average price of $89,960 per bitcoin — taking its total holdings to 650,000 BTC.

Perhaps more interestingly, the firm also announced a new U.S. dollar reserve of $1.44 billion to support the payment of dividends on its preferred stocks and interest on its existing debt, funded by at-the-market sales of its MSTR common stock.

"Strategy's current intention is to maintain a USD Reserve in an amount sufficient to fund at least twelve months of dividends, and Strategy intends to strengthen the USD Reserve over time, with the goal of ultimately covering 24 months or more of its dividends," the firm said in a Securities and Exchange Commission filing .

While Strategy has always referenced the possibility of bitcoin sales in its regulatory filings, co-founder Michael Saylor was more explicit during the firm's latest investor call about the scenario, if challenging market conditions persist further into the future. "There are skeptics and cynics that have been of the opinion that we couldn't, or wouldn't, or don't have the will to sell bitcoin in order to finance the dividends, and that sometimes becomes a negative short narrative. I think it's important for us to dispel this notion," Saylor said.

"Not only can the company sell bitcoin in order to pay the dividends, the company can actually sell highly appreciated bitcoin, pay the dividends, and then continuously increase its bitcoin holdings in bitcoin every quarter, forever," Saylor added.

However, Strategy's dividend and interest payments are not a near-term concern, Hougan said, with $1.4 billion in cash enough to easily cover its commitments for a year and a half. Meanwhile, its first debt maturity does not arrive until February 2027 and totals about $1 billion, which he characterized as "chump change" relative to the firm's roughly $60 billion bitcoin holdings. These factors, he said, eliminate the premise that Strategy is anywhere close to needing to liquidate its bitcoin to meet obligations right now.

Insider pressure

Hougan also dismissed the idea that insiders might push the company to sell its bitcoin should its stock — down 59% from its summer DAT craze peak — continue to slide. Saylor controls 42% of Strategy's voting shares and, he wrote, is unlikely to abandon his long-held conviction. Saylor "didn't sell the last time MSTR stock traded at a discount, in 2022," Hougan said. "You'd be hard pressed to find a human being with more conviction on bitcoin's long-term value."

With bitcoin trading around $93,000 — about 25% above Strategy's average acquisition price of $74,436 — he said the bears' "doom loop" scenario collapses under scrutiny.

In closing, Hougan said crypto investors have legitimate issues to worry about, from slow progress on market-structure legislation to the health of smaller digital asset treasury companies. But Strategy's bitcoin stack, he argued, should not be one of them. The MSCI outcome, in his view, is already largely reflected in the share price, and "there's no plausible near-term mechanism that would force it to sell its bitcoin."