- Bitcoin and other cryptocurrencies are losing ground Monday, while stocks related to the industry are also slumping.
- Bitcoin fell sharply in November, as uncertainty in the markets led some investors to shed riskier assets such as cryptocurrencies.
Cryptocurrencies tumbled Monday morning as risk-averse sentiment returned to financial markets.
Bitcoin (BTCUSD), the largest cryptocurrency by market capitalization, was trading at $84,200 recently, down from a weekend high of around $91,000. Other digital assets, including ether and solana, were also down sharply.
Crypto-related stocks also retreated, with shares of trading platform operators Coinbase (COIN) and Robinhood (HOOD) each dropping more than 6%, making them among the top decliners today in the S&P 500. Shares of Strategy (MSTR), the largest corporate holder of bitcoin, plunged 11%, while bitcoin miner Mara Holdings (MARA) fell 8%.
Why This Matters to Investors
Cryptocurrency moves can indicate how investors feel about the broader market. Assets such as bitcoin tend to rise in stable markets when investors are more comfortable taking risks, but can fall sharply when volatility is high and investors have less of an appetite for risk.
The price of bitcoin swung wildly in November—hitting a high near $110,000 early in the month before sliding as low as $82,000 a few weeks later—as volatility gripped financial markets, weighing heavily on assets that are perceived as risky.
Strategy CEO Phong Le said in an interview released last week that the company would consider selling bitcoin to fund things like stock dividends if its mNAV, a metric that tracks the value of its bitcoin holdings to the company's market capitalization, falls below 1.00. Strategy's mNAV was at about 1.1 recently.
“There’s the mathematical side of me that says that would be absolutely the right thing to do, and there’s the emotional side of me, the market side of me, that says we don’t want to really be the company that’s selling bitcoin,” Le said. “Generally speaking, for me, the mathematical side wins.”
Strategy says it's creating a U.S. dollar reserve to pay dividends and cope with volatility
The CEO of the world's biggest bitcoin treasury, Strategy, has laid out a scenario in which the company would consider selling some of its bitcoin holdings.
The biggest corporate holder of bitcoin has announced a U.S. dollar dividend reserve of more than $1 billion, days after its top executive laid out what might force the company to sell some of its $56 billion in bitcoin holdings.
Strategy (MSTR) announced Monday that it will establish a $1.44 billion reserve "to support the payment of dividends on its preferred stock and interest on its outstanding indebtedness." The reserve was funded by sales of its class A common stock, and Strategy plans to keep sufficient reserves to fund its dividends for at least 12 months.
The bitcoin treasury company said that based on an assumed year-end bitcoin price range of $85,000 to $110,000, the company would report, for the full year, between a loss of $5.5 billion and a profit of $6.3 billion.
Since bitcoin peaked on Oct. 6, the cryptocurrency has lost 31%, while Strategy's stock has tumbled 53%. However, the correlation between bitcoin and the stock has increased during the selloff, with the correlation coefficient rising to 0.97 (a correlation of 1.00 means they always move in the same direction) compared with a year-to-date correlation of 0.55. Bitcoin was down by more than 5% on Monday to $86,262.
The latest update from Strategy comes just days after CEO Phong Le said in a podcast that the company would have to sell bitcoin if its multiple to net asset value - a valuation metric known as mNAV that divides the company's market capitalization by the market value of the bitcoin it holds - fell below 1.
"So now, as we're looking at bitcoin winter, as we see our mNAV compressing, my hope is our mNAV doesn't go below 1. But if we did and we didn't have other access to capital, we would sell bitcoin," he told a podcast interview that published Friday. "That would be a last resort."
The mNAV for the company formerly known as MicroStrategy, whose shares are down 38% this year, currently stands at 1.19 but reached as high as 2.5 in 2024 and around 1.7 in June. An mNAV above 1 means Strategy trades at a premium to its bitcoin holdings.
Read: Chanos declares victory in his bet vs. Strategy's Saylor
"We don't really want to be the company that's selling bitcoin," Le said. "We have the most bitcoin. Us selling bitcoin wouldn't be good for the ecosystem. It wouldn't be good for the narrative."
The CEO said he remains optimistic on bitcoin going forward, saying that as long as the crypto can double the performance of the S&P 500 SPX -gaining, say, 30% a year compared with the index's 14% - then "we're going to win."
"I think for the foreseeable future, we're still talking 50% to 40% annualized returns over a four- to five-year period," he said. "It's an amazing technology, it has an amazing store value asset, it's nonsovereign, it has a limited supply."
Bitcoin weakness on Monday came as U.S. stocks were under pressure as they kicked off the last trading month of the year. The two asset classes have been increasingly correlated this year, driving unease for investors when bitcoin runs into selling pressure, as it has in recent weeks.