Bitcoin Continues to Plummet, "Is MSTR Forced to Sell Off" Becomes the Focus

Article by: Ye Zhen
Source: Wall Street Insights

Bitcoin is undergoing a severe stress test on institutional holdings. As the price drops below a key psychological level and approaches the cost basis of major institutional holders like Strategy, market concerns over liquidity for high-leverage positions are rapidly intensifying.
Over the weekend, Bitcoin broke through the $80,000 mark for the first time since April 7, 2025, hitting its lowest level in nearly two years. This sell-off occurred amid a backdrop of significantly reduced market liquidity, further exacerbating Bitcoin’s recent decline of over 30%.

Despite the bearish sentiment, Strategy Executive Chairman Michael Saylor 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 dividends 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 warn that if the coin’s price remains stagnant or falls below its cost basis, the high dividend payouts could lead to severe cash flow pressures.

Macro strategist Jim Bianco from Bianco Research pointed out that the Bitcoin market is facing a narrative exhaustion crisis. Currently, the market structure is highly institutionalized, with ETF investors and Strategy controlling about 10% of the circulating supply, and the overall position is currently underwater. 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 among institutional holdings and net ETF outflows
Bianco’s analysis shows that Bitcoin is becoming highly “institutionally booked,” meaning the market can now clearly observe the cost basis and profit/loss status of large positions. Currently, Strategy and 11 spot Bitcoin ETFs hold about 10% of the circulating Bitcoin, with an average purchase cost of approximately $85,360. At current prices, these institutional holdings are collectively underwater by about $8,000 per Bitcoin, with unrealized losses totaling roughly $7 billion.

Among these, spot ETFs have become a core force influencing supply and demand. Data shows that the 11 largest spot Bitcoin ETFs hold 1.29 million BTC, 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, and the current price is about $13,000 below their cost basis.

This high-position accumulation structure has led to a typical pro-cyclical effect. Bianco notes that these ETFs have experienced net outflows for 10 consecutive trading days, as investors are redeeming during the retracement after buying at high levels. This capital structure is amplifying downward market volatility.

Strategy’s safety cushion narrows, aggressive financing raises concerns
As a benchmark for corporate Bitcoin holdings, Strategy’s balance sheet is facing its most severe test in months. Currently, the company holds 712,647 BTC, 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 shrunk significantly to less than 3%.

Despite the thinning safety cushion, Strategy 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 that carries a substantial 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’s debut in November, sales of this product alone have financed the acquisition of over 27,000 BTC.

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

Old narratives are failing; the market urgently needs new drivers
From a macro perspective, this plunge has intensified weeks of market disappointment. Jim Bianco believes that the real issue facing Bitcoin is a lack of new narratives. The previously highly anticipated “Old Money Entry” (Boomer Adoption) story has been fully priced in and is even being disproven.

The current market structure shows that ETFs and Strategy are not only heavily buying but also concentrated in their holdings, with the overall position now underwater. Bianco points out that unless a new, sustainable buying narrative emerges, the trend of capital outflows may continue. In this scenario, the once-positive high-level institutional holdings could turn into the biggest source of market pressure. The current problem with Bitcoin is not about whether people bought in the past, but where the next wave of buyers will come from at this price level.