Bitcoin mines at $78k per coin, while it is currently trading at ~$60k. Bitcoin has been mined at a loss for the last 5 months. One million bitcoins are left to be mined, requiring greater & greater computing power to produce– meaning higher mining costs in the future. But miners can’t continue to mine bitcoin as a business when it loses that much money. New supply of bitcoin is being squeezed due to thin liquidity and weak demand.
Furthermore, Strategy (MSTR) can no longer afford to make massive buys of bitcoin. After selling 32 bitcoins in late May to test the market, bitcoin quickly dropped from ~$73k to its current $60k level. What this revealed is that Michael Saylor can’t sell any bitcoin without causing a massive slide in bitcoin price. Michael Saylor has been the only large scale buyer of bitcoin for some time now. He has financed his bitcoin buying with MSTR preferred stock sales, promising healthy monthly returns to investors, which he soon won’t be able to pay.
The Block reports that if bitcoin slides to $50k, then MSTR stock will fall to $60; if bitcoin goes to $40k, then $36; if bitcoin falls to $30K, then $13. Strategy stock needs to trade at $100 and over for Michael Saylor’s dividend plan to remain solvent. Strategy is currently trading at $85 and falling, and Michael Saylor is running out of cash.
Strategy can’t sell bitcoin, because when it does the crypto market crashes. Strategy has reached its limits in selling stock as investors are losing confidence in the bitcoin market. It is a market waiting for buyers– and there aren’t any. ETF outflows on bitcoin are now ~$500M/day. Futures traders (the derivatives market) are betting on bitcoin going down.
Bitcoin faces downward pressure in retail & institutional buying (ETF outflows), derivative shorting, and Strategy being tapped out. Their debt is massive, and unpayable from any rational perspective. But rationality left the station long ago in the world of capitalist finance. In this post-2008 crash era of financial manipulation & parasitism, bitcoin rose to prominence as ‘digital gold’, the future of money, decentralized finance free from government regulation, etc. Today bitcoin personifies the Ponzi scheme hucksterism which inhabits the crypto-fascist White House.
Coindesk just reported that of the approximately 20 million bitcoins now in existence, ~11 million of them are held at a loss. Back in early 2020 when COVID hit the US, bitcoin was <$10k. After rising to $126k last October, it has more than halved in trade price since. This means the losses for each bitcoin holder who is underwater are much, much greater than any previous era, and they represent 55% of all bitcoins held.
This is unsustainable. You can’t have a supposed currency which few people use that is a net loss as an investment for over half of its supply. As discussed in the earlier linked piece, if bitcoin falls to ~$20k it’s lights out for crypto. With the latest data that’s been made public, the bitcoin ‘kill price’ is probably now closer to $30-40k– due to Strategy be so over-leveraged & cash-strapped. The important thing is that bitcoin doesn’t need to go to zero (or anywhere close) for the entire crypto market to crash.
It’s a death spiral for bitcoin, for which there is no way out. Bitcoin will soon crash, and when it does, the banks and large financial institutions that have loaned hundreds of billions of dollars to bankrupt crypto ventures will be demanding another US taxpayer bailout. Bitcoin/crypto has very little public confidence anymore. Many early Kool-Aid drinkers have been pushed out of bitcoin, and lost their money to crypto whales. Only inside traders & Ponzi scheme chieftains are benefiting in crypto.
Capitalism is an unfair, rigged game, and that is the lesson Libertarians refuse to learn. They thought bitcoin would change the world. Instead it became just another financial bubble, deeply tied to US imperialism & corporate financial swindling. Bitcoin in its 15-year-or-so history has risen from obscurity to become a global get-rich-quick phenomenon, which is now an albatross for the entire global financial system.
All eyes in crypto focus on Strategy and what Michael Saylor will do. He’s the massive whale on the hook, with over 850,000 bitcoins he bought at an average price of $76k. His ‘buy high & hold’ strategy is in ruins, with no hope for a price recovery, as all the big tech money is shifting into AI. MSTR needs a bitcoin buyer and there aren’t any.
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