An inverse exchange-traded fund linked to Strategy (07399) has surged dramatically, gaining more than 27%. At the time of writing, the fund is up 24.93% to HK$45.4, with a trading turnover of HK$1.6951 million.
The sharp move coincides with Bitcoin's price falling below the $62,000 threshold.
Strategy, whose executive chairman Michael Saylor is renowned in cryptocurrency circles for the mantra "never sell Bitcoin," disclosed on Monday that it sold 32 Bitcoins last week, realizing a profit of approximately $2.5 million. The company indicated it plans to use the proceeds for preferred stock dividends.
This action marks a notable shift. Jeff Dorman, Chief Investment Officer at Arca, commented that Strategy's decision to significantly increase its preferred share debt has altered the risk profile of the Bitcoin strategy championed by Saylor.
Strategy is now facing a difficult set of choices. Selling Bitcoin could negatively impact market sentiment towards the cryptocurrency. Selling company stock would dilute the equity of Strategy shareholders. Issuing more debt could harm the company's credit quality. Conversely, cutting the preferred stock dividend might trigger a crash in those shares' prices and potentially lead to lawsuits.
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