Strategy's 713,502 Bitcoin (BTC) holdings fell underwater for the first time since October 2023 as BTC dropped below the company's $76,052 average purchase price.
The move wiped out $47 billion unrealized gains and left the firm with paper losses exceeding $900 million.
Bitcoin fell as low as $72,300 Wednesday's evening before rebounding above $77,000. Strategy accumulated heavily near Bitcoin's October peak above $126,000, leaving the company exposed when prices collapsed in late January.
The company faces no forced selling or immediate solvency concerns. Strategy holds unencumbered Bitcoin and $1.44 billion in dollar reserves for interest and dividend payments.
What Happened
Strategy purchased 855 Bitcoin for $75.3 million on January 27 at an average price of $87,974 per coin. Bitcoin crashed below $75,000 within days of the disclosure.
Executive chairman Michael Saylor posted "The Rules of Bitcoin: 1. Buy Bitcoin 2. Don't Sell the Bitcoin" on Tuesday amid the selloff. The company continues weekly purchases despite the underwater position.
Gold advocate Peter Schiff criticized the timing, arguing Strategy's buying drove Bitcoin's rise but the company can't sustain purchases at current valuations. Strategy stock trades below net asset value, making new share issuance less attractive.
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Why It Matters
Strategy needs Bitcoin prices above its cost basis to issue stock at premiums and buy more Bitcoin without shareholder dilution. The company acquired $54 billion in Bitcoin over five years but sits roughly 3% underwater on the position.
Saylor claimed 15 million beneficiaries hold Strategy securities through pension funds, insurance companies and retail accounts during a December Bitcoin MENA conference speech. He said 15% of Strategy securities sit in Charles Schwab accounts alone.
The company owns approximately 3% of Bitcoin's 21 million supply. Saylor argued this doesn't create concentration risk because millions of distributed investors hold Strategy shares rather than direct Bitcoin exposure.
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