Source: Cointelegraph Original: "{title}"
The escalating tariff tensions have raised concerns among investors about the economic outlook, offsetting the positive effects of a series of announcements supporting cryptocurrency made by U.S. President Trump last week. The cryptocurrency market started the week poorly, continuing its downward trend on Tuesday (March 11), with Bitcoin falling to its lowest level since last November, although the decline later narrowed.
According to data from Gate.io, as of Tuesday at 4:15 PM, Bitcoin had dropped 1.61% in the past 24 hours, trading at $80,735; Ethereum and Solana fell by 7.65% and 3.57%, respectively.
Nikolay Karpenko, a director at UK cryptocurrency liquidity provider B2C2, noted in a report that although Trump's statements regarding the strategic reserve of cryptocurrencies initially brought optimism, this rally quickly collapsed as a wave of selling related to the deteriorating macroeconomic environment emerged.
The Bitcoin strategic reserve plan announced by Trump last week and the high-profile White House summit in Washington brought little uplift to the market. Despite the government's commitment to build this reserve using cryptocurrencies seized through legal processes, the market remains disappointed due to a lack of new capital commitments. The U.S. government currently holds approximately $17 billion in Bitcoin and about $400 million in other token assets.
Ari Paul, co-founder of cryptocurrency investment firm BlockTower Capital, stated, "The government's apparent arbitrariness and favoritism in choosing strategic reserve assets, especially after the launch of Trump Coin (TRUMP) and Melania Coin (MELANIA), has greatly undermined investor confidence. It gives the impression that the Trump administration is selecting and promoting 'insider' assets through lobbying, while the current cryptocurrency market resembles a short-term speculative casino."
What is the current situation for companies that once heavily invested in Bitcoin?
According to data from cryptocurrency data tracking site CoinGecko, MicroStrategy currently holds 444,262 Bitcoins, accounting for over 2% of the total Bitcoin supply, with a holding market value of approximately $35.4 billion and a total purchase cost of about $27.7 billion, averaging a purchase price of $62,350 per Bitcoin.
Following closely are Bitcoin mining company Marathon Digital Holdings and digital asset financial services company Galaxy Digital Holdings, with holdings of 26,842 and 15,449 Bitcoins, respectively, far less than MicroStrategy's holdings.
Bitcoin holdings of listed companies. Source: CoinGecko
MicroStrategy's aggressive accumulation of Bitcoin has been a topic of controversy in the market, with some praising its bold bet on digital assets, while others deem it a high-risk financial strategy. Currently, although Bitcoin has not fallen below its average purchase price, in the short term, a decline in Bitcoin prices primarily impacts the company's stock price.
MicroStrategy's stock fell about 17% on Monday to $239.27. Since reaching a historical high closing price of $473.83 last November, the company's stock price has dropped to nearly half of its peak. However, the stock price is still slightly higher than its closing price on the day of the U.S. presidential election, and 11 analysts surveyed by Bloomberg even gave it a "buy" rating, with an average target price significantly above last year's record of $540.
Steve Sosnick, chief strategist at Interactive Brokers, stated, "Cryptocurrency trading has its own peculiarities and is also influenced by overall risk trading, both of which are not particularly favorable for Bitcoin." He believes this means that MicroStrategy, as a leveraged representative of Bitcoin, will also "face its own challenges."
Other cryptocurrency-related stocks have also retreated. From January 17 to last Friday, Coinbase's stock price fell by 26%, while the stock prices of cryptocurrency miners like Galaxy Digital Holdings and Riot Platforms Inc. also plummeted.
Additionally, the decline in Bitcoin prices will affect the company's financial performance. According to accounting standards, companies must recognize impairment losses when Bitcoin prices fall, but cannot directly reflect gains when prices rise. For example, during the Bitcoin crash in 2022, MicroStrategy recognized an impairment loss of $197 million in its fourth-quarter financial report, resulting in a quarterly loss.
In the long term, if Bitcoin indeed falls into a bear market, MicroStrategy will face significant financing pressure. The company's main business is enterprise business intelligence (BI) and analytics software, but according to the 2024 financial report, the software business's annual revenue is only $500 million, which is small and still operating at a loss. The market's focus on MicroStrategy is more centered on its Bitcoin investment strategy.
On Monday, MicroStrategy issued a statement indicating that the company is preparing to raise $21 billion through the issuance of new shares to support its business operations, including purchasing more Bitcoin.
Related: Analysts say the dollar's plunge provides momentum for a Bitcoin bull market, but other indicators raise concerns.
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