Bitcoin is undergoing a severe stress test on institutional holdings, with prices breaching key psychological barriers and approaching the cost basis of major holders like MicroStrategy, rapidly intensifying market concerns over liquidity for highly leveraged entities. Over the weekend, Bitcoin decisively fell below the $80,000 mark, hitting its lowest level since April 7, 2025. This wave of selling occurred against a backdrop of significantly thin market liquidity, further exacerbating Bitcoin's recent cumulative decline of over 30%.
Despite the gloomy market sentiment, MicroStrategy Executive Chairman Michael Saylor still used social media platform X on Sunday to post a picture with the words "More Orange," hinting at continued accumulation. The company announced a 25-basis-point increase in the dividend for its Series A Perpetual Extension Preferred Shares (STRC) to 11.25%, intending to attract capital with high financing costs to sustain its Bitcoin acquisition strategy. However, analysis suggests that if the price remains stagnant or falls below its cost basis, the substantial dividend payments could trigger a severe cash flow squeeze.
Jim Bianco, Macro Strategist at Bianco Research, analyzed that the Bitcoin market is facing a crisis of narrative exhaustion. The current market structure is highly institutionalized, with ETF investors and MicroStrategy collectively controlling about 10% of the circulating supply, and are currently in an overall unrealized loss position. This indicates that the once market-supportive narrative of "institutional adoption" could reverse into a massive source of selling pressure after being trapped at high levels.
Unrealized losses on institutional holdings are worsening, and ETFs are experiencing a net outflow trend. Jim Bianco's analysis shows that Bitcoin is becoming highly "institutionalized on the books," meaning the market can, for the first time, clearly observe the cost basis and profit/loss status of large capital. Currently, MicroStrategy and the 11 spot Bitcoin ETFs collectively hold approximately 10% of the Bitcoin circulating supply, with a combined average acquisition cost of about $85,360. At the current price, these institutional holdings are facing an overall unrealized loss of about $8,000 per coin, with total unrealized losses reaching approximately $7 billion.
Among these, spot ETFs have become a core force affecting the supply-demand structure. Data shows that the 11 largest spot Bitcoin ETFs hold 1.29 million Bitcoin, accounting for 6.5% of the total circulating supply, with a market value of about $115 billion. However, the average purchase cost for these ETF investors is as high as $90,200, and the current price is about $13,000 below their cost basis.
This structure of buying at the peak has led to a typical pro-cyclical effect. Bianco points out that these ETFs have seen net outflows for 10 consecutive trading days, as investors choose to redeem following the pullback after buying high; this capital structure is amplifying the market's downward volatility. MicroStrategy's safety margin is narrowing, and aggressive financing raises concerns. As a benchmark for corporate Bitcoin holdings, MicroStrategy's balance sheet is facing its most severe test in months. The company currently holds 712,647 Bitcoin with an average cost of approximately $76,037. As Bitcoin's trading price falls back to around $78,000, the company's unrealized gains have sharply narrowed to less than 3%.
Despite the thinning safety margin, MicroStrategy has not shown signs of retreat. To fund the next phase of purchases, the company adjusted the yield on its STRC product to 11.25%, a rate that carries a huge premium compared to typical corporate bonds, reflecting the company's extreme thirst for capital and the inherent volatility risk of its Bitcoin-centric model. Data indicates that since the STRC product's debut in November, sales of this product alone have funded the acquisition of over 27,000 Bitcoin. Analysis suggests that MicroStrategy remains profitable, but its margin for error has significantly diminished. If prices fall further, the company could face an overall unrealized loss. Maintaining such high-cost dividend payments could cause cash flow strain, a risk that becomes particularly acute if the Bitcoin price breaches its cost "waterline" of $76,000. Old narratives are failing, and the market urgently needs new drivers. From a macro perspective, this sharp decline has intensified the disappointment that has been building in the market for weeks. Jim Bianco believes the real problem Bitcoin faces is a lack of new narratives. The previously high-hoped "Boomer Adoption" story has already been fully priced in and is even being disproven. The current market structure shows that ETFs and MicroStrategy not only bought heavily and concentratedly but are also currently trapped overall. Bianco notes that as long as no new, sustainable buying narrative emerges, the trend of capital outflow is likely to persist. In this scenario, the high level of institutional holdings, once seen as a positive, could instead transform into the market's greatest source of pressure. Bitcoin's current problem is not whether people bought in the past, but rather, at the current price level, where the next wave of buyers will come from.
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