Written by: Ye Zhen
Source: Wall Street Insights
Bitcoin is undergoing a severe stress test on institutional holdings. As the price falls below key psychological levels, approaching the cost basis of major institutional holders like MicroStrategy, market concerns over liquidity for highly leveraged holders are rapidly intensifying.
Over the weekend, Bitcoin broke below the $80,000 mark, hitting its lowest level since April 7, 2025. This round 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 posted a picture with the words "More Orange" on social media platform X on Sunday, 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 maintain its Bitcoin acquisition strategy. However, analysis points out that if the coin price continues to stagnate or falls below its cost basis, the high 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 floating loss position. This suggests that the once market-supportive narrative of "institutional entry" could reverse into a massive source of selling pressure after being trapped at high levels.
Institutional Holdings' Floating Losses Worsen, ETFs See Net Outflow Wave
Jim Bianco's analysis shows that Bitcoin is becoming highly "institutionalized," meaning the market can clearly observe the cost basis and profit/loss status of large capital holdings for the first time. Currently, MicroStrategy and the 11 spot Bitcoin ETFs collectively hold about 10% of the Bitcoin circulating supply, with a combined average purchase cost of approximately $85,360. At the current price, these institutional holdings are facing an overall floating loss of about $8,000 per coin, with total unrealized losses reaching approximately $7 billion.
Among them, spot ETFs have become the core force affecting the supply and demand structure. Data shows that the 11 largest spot Bitcoin ETFs hold 1.29 million Bitcoins, 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 coin price is about $13,000 lower than their cost basis.
This high-level acquisition structure has led to a typical pro-cyclical effect. Bianco points out that these ETFs have seen net outflows for 10 consecutive trading days. Investors are choosing to redeem after buying high and experiencing a pullback. This capital structure is amplifying the market's downward volatility.
MicroStrategy's Safety Margin Narrows, 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 Bitcoins, with an average cost of approximately $76,037. As Bitcoin trades around $78,000, the company's unrealized gains have significantly narrowed to less than 3%.
Despite the thinning safety margin, MicroStrategy shows no signs of retreating. To fund the next phase of purchases, the company adjusted the yield on its STRC product to 11.25%. This return rate represents 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 shows that since the STRC product's debut in November, sales of this product alone have funded the acquisition of over 27,000 Bitcoins.
Analysis suggests that MicroStrategy is still profitable, but its margin for error has significantly shrunk. If the price falls further, the company will face an overall floating loss. Maintaining such high-cost dividend payments could cause cash flow strain, especially if the Bitcoin price falls below its $76,000 cost "waterline," making this risk particularly acute.
Old Narrative Fails, Market Urgently Needs New Momentum
From a macro perspective, this plunge has intensified the market's weeks-long disappointment. Jim Bianco believes the real problem Bitcoin faces is the lack of a new narrative. The previously high-hoped "Boomer Adoption" story has been fully priced in, or even disproven.
The current market structure shows that ETFs and MicroStrategy not only bought a lot, bought concentratedly, but are also currently trapped overall. Bianco points out that as long as there is no new, sustainable buying narrative, the trend of capital outflows is likely to continue. In this case, the high level of institutionalized holdings, once seen as a positive, may instead become the market's biggest source of pressure. Bitcoin's current problem is not whether anyone bought in the past, but where the next batch of buyers will come from at the current price level.
