Strategy CEO: Bitcoin would need to plunge to $8,000 before balance sheet issues

Strategy CEO Phong Le told investors that the company's balance sheet remains resilient despite bitcoin's BTC recent downfall.

Le said during the Strategy's fourth-quarter financial results webinar that bitcoin would need to drop to $8,000 and remain at that level for five to six years before posing a real threat to servicing its convertible debt.

"In the extreme downside, if we were to have a 90% decline in bitcoin price, and the price was $8,000, that is the point at which our bitcoin reserve equals our net debt, and we will not be able to then pay off our convertibles using our Bitcoin reserve, and we'd either look at restructuring, issuing additional equity, issuing additional debt," Le said. 

The comment came during Strategy's fourth-quarter earnings call on Thursday, where company executives addressed the impact of bitcoin's recent downturn on the firm's finances. 

Strategy, the largest corporate holder of bitcoin, reported a net loss of $12.6 billion for the quarter, largely due to unrealized losses on its digital asset holdings as bitcoin's price fell below the firm's average acquisition cost. 

"These results were obviously driven by the quarter-end decline in bitcoins for value under our mark-to-market accounting," said Strategy CFO Andrew Kang. Still, Kang noted the firm's long-term approach, adding that "even in a volatile environment, we continue to execute."

Executive Chairman Michael Saylor echoed the sentiment. "Quarter-to-quarter moves like this can be sharp, can also be unsettling, but it's important to emphasize that our strategy is built for the long term," Saylor said. "It's built to withstand short-term price volatility, even short-term extreme conditions like we're seeing today."

Thursday's webinar took place amid a sharp sell-off across crypto markets, with bitcoin currently down 9% in the past 24 hours to trade at $64,833. Strategy's MSTR erased much of its prior gains, falling 17.12% on Thursday to $106.9. It is down 72% in the past six months. Saylor directed investors to look to positive fundamentals, such as supportive U.S. regulatory shifts.

Quantum threats

Meanwhile, Saylor addressed bitcoin's ongoing quantum computing concerns during the earnings call, dismissing them as part of what he called a "parade of horrible FUD" surrounding bitcoin.

"We think it's probably 10 or more years away before there's a threat, that is the consensus," Saylor said. "It's a promising technology, but it's still nascent."

Saylor stated that quantum computing would pose a risk not only to bitcoin, but also to the finance and defense industries that are dependent on traditional cryptography. He added that significant investment is already flowing into the development of quantum-resistant protocols, and bitcoin will be upgraded through global consensus.

"Bitcoin is upgradable, and bitcoin can be upgraded to be stronger," Saylor said. "We are optimists, and we believe that the human race will accept challenges and we'll upgrade to meet those challenges and do it in a rational fashion."

To support appropriate consensus and solutions for bitcoin's quantum resistance upgrade, Saylor announced that Strategy will launch a Bitcoin Security program that coordinates with the global cyber, crypto, and bitcoin security communities.

"The company is well managed, well collateralized, and responsibly structured so that we can stand difficult months, difficult quarters, even difficult years or two or three-year cycles at a time," Saylor said. "We've done it before. And we're prepared to do it going forward."