As bitcoin remains weak, unrealised losses are growing not only for individual investors but also for corporate holdings. Strategy, which has drawn market attention for its bitcoin-holding strategy, is down more than 10 percent from its average purchase price, prompting interest in how it will respond.

On Feb. 20 (local time), blockchain media outlet The Crypto Basic cited an analysis by on-chain analytics firm Arkham Intelligence in reporting that Strategy is unlikely to sell bitcoin.

Strategy bought 717,131 BTC for $54.52 billion, but based on the current price its holdings are valued at $48.02 billion, leaving it with a $6.5 billion loss, about 9 trillion won. That has raised the possibility that the company could sell its bitcoin holdings to repay short-term debt, but Arkham Intelligence assessed that the likelihood of a sale is low.

Strategy has financed bitcoin purchases by issuing preferred shares and convertible bonds, and analysis suggests this funding structure helps reduce near-term selling pressure. Preferred shares such as STRK, STRF, STRD, STRC and STRE offer dividends of about 8 to 10 percent a year, but dividend payments are not legally mandatory. Also, except for STRK, the rest do not convert into common stock.

Convertible bonds worth $8 billion carry repayment burdens at maturity, but Arkham Intelligence said the company is likely to refinance them, leaving little immediate incentive to sell bitcoin.

Not long after, Strategy increased its holdings by buying an additional 2,486 BTC, reaffirming its holding strategy. The market interprets the move as focusing on expanding holdings rather than short-term profit and loss, and sees a strong possibility that it will continue additional purchases within the limits allowed by funding conditions.

Ultimately, the key issue is not whether it sells, but how long Strategy can keep pushing this approach. The more bitcoin prices fluctuate, the greater the impact the company’s funding structure and pace of additional purchases could have on market sentiment and supply and demand. The market is watching whether this downturn will be the first major test of Strategy’s holding strategy.

SAYLOR IS UNDERWATER. BUT WILL HE SELL BTC? Saylor is over 10% underwater from his average purchase price. But what could actually force him to sell Bitcoin? Here’s an explainer of how, when and why Strategy might be forced to sell BTC. pic.twitter.com/uKbJ3ivO54