Strategy, formerly MicroStrategy Incorporated (NASDAQ:MSTR), shares plunged more than 10% on Monday following a sharp drop in Bitcoin prices and the company’s announcement of a new US dollar reserve.
Bitcoin was down 6.6% at about $84,500, sharply lower than its highs above $100,000 at the start of November.
Strategy, which holds around 650,000 Bitcoin, is widely seen as a leveraged proxy for the cryptocurrency, causing its stock to move in tandem with Bitcoin’s fluctuations.
“Bitcoin’s ongoing slump has been a disaster for Strategy, as the stock hits fresh one-year lows,” IG chief market analyst Chris Beauchamp said in a statement.
“Many had hoped that the lows last week in bitcoin would mark a recovery for the stock, but while the cryptocurrency is still above the November low the selling appears to be intensifying as the afternoon goes on. The movement is turning into a capitulation moment, but there are precious few buyers willing to step in at these levels.”
Further, the company said on Monday it has established a US$1.44 billion reserve to support dividend payments on preferred stock and interest on outstanding debt. Funded through the sale of Class A common shares, the reserve is intended to cover at least 12 months of dividends, with plans to expand coverage to 24 months over time.
“Establishing a USD Reserve to complement our BTC Reserve marks the next step in our evolution, and we believe it will better position us to navigate short-term market volatility,” Strategy founder and executive chairman Michael Saylor said in a statement.
Strategy also updated its assumptions for fiscal year 2025 earnings and Bitcoin key performance indicators. The company now assumes a year-end Bitcoin price range of $85,000 to $110,000, down from its earlier $150,000 target.
Based on this range, projected 2025 operating income is between $(7.0) billion and $9.5 billion, net income between $(5.5) billion and $6.3 billion, and diluted earnings per share between $(17.0) and $19.
Updated Bitcoin KPI targets include a BTC yield of 22% to 26% and projected gains of $8.4 billion to $12.8 billion. Strategy noted that earnings results are highly sensitive to Bitcoin prices and may vary significantly depending on market conditions.