Bitwise CIO Matt Hougan Refutes Speculations About Strategy Forced to Sell Bitcoin Holdings

Investment Analyst Refutes Concerns About Strategy’s Bitcoin Possession

Matt Hougan, Bitwise’s Chief Investment Officer, recently repudiated the increasingly popular theory that the data analytics corporation, Strategy (formerly MicroStrategy), may be compelled to unload its extensive bitcoin trove. According to Hougan, this suggestion is utterly unfounded. He believes that neither alterations in indexes nor external market forces necessitate such a drastic move. In a recent advisory to clients, Hougan articulated his response to a recurring inquiry: If Strategy is ejected from MSCI indexes, would the company be obliged to disassemble its sizeable bitcoin investment? The consensus among clients appears to suggest a correlation between these two events. However, Hougan believes otherwise. Hougan accepts that MSCI is indeed scrutinizing whether to exclude organizations holding digital assets from its investment index. This determination may materialize by January 15. Certain estimates by JPMorgan indicate that exclusion from the MSCI indices could initiate Strategy stock selling worth approximately $2.8 billion. Although, Hougan’s personal evaluation gives Strategy a 75% probability of being evicted. Notwithstanding, historical tendencies advocate that additions or reclamations from stock indices wields less influence on investment decisions than initially perceived. This is illustrated by Strategy’s incorporation into the Nasdaq-100 in the previous year, which necessitated funds to acquire $2.1 billion worth of shares. Interestingly, this event barely registered on the scale of the company’s stock market price. The executive at Bitwise also speculated that the noticeable decline of Strategy’s worth since October 10 is potentially connected to worries about the possible exclusion. Despite this, he doesn’t expect major variations in the market price.

Floating Circumstances

The majority of investors have been concerned that the ensuant events after being removed from the MSCI index could lead to a sharp decrease in Strategy’s stock worth, which would pressure the company into selling its bitcoin reserves to stabilize its financial standing. However, Hougan argues that this concern is groundless. Even in the event of the stock price plummeting below the Net Asset Value (NAV), it does not oblige Strategy to sell. Strategy is responsible for two debt obligations – approximately $800 million annually in interest payments and the management of debt maturity schedules, but neither exerts immediate pressure on the company.

Strategy’s Monetary Reserves in USD

Earlier in the week, Strategy proclaimed that it had procured an additional 130 bitcoins for an aggregate sum of roughly $11.7 million. This purchase expanded the company’s overall bitcoin holding to 650,000 BTC. In a potentially more intriguing announcement, Strategy stated the establishment of a USD reserve amounting to $1.44 billion. This reserve is expected to endorse dividend payments on the company’s preferred stocks and interest on its existing debts. Company co-founder Michael Saylor further clarified this state of affairs during Strategy’s latest investor call. Saylor announced that not only can the company sell bitcoin to cover dividends but it can also increase the overall bitcoin holdings quarter on quarter.

No Immediate Threat

Yet, as Hougan points out, the need for Strategy to cover dividend and interest payments is not a pressing issue as of now. With a cash reserve of $1.4 billion, the company has more than enough money to easily cover its yearly obligations. He also points out the company’s first debt maturity is not due until February 2027 and that $1b in comparison to their $60b bitcoin assets is insignificant. Finally, Hougan dismissed potential internal pressure to sell Bitcoin due to a stock market slide. Current Bitcoin price is about 25% above Strategy’s average acquisition price, debunking the bearish ‘doom loop’ claim. Marshall believes the threat of forced sale of Bitcoin due to current market events is negligible. He finishes by saying that even though there are valid concerns in the crypto market regarding Structure, legislative progress and health of smaller digital asset treasury companies, Strategy’s Bitcoin stack should not be one of them. Current market price already largely reflects the MSCI outcome. There is no plausible near-term force that could coerce Strategy into selling its Bitcoins.