Schaaf’s comments sound very similar to ECB President Christine Lagarde’s stance against Bitcoin in central bank reserves. Meanwhile, Bitcoin’s recent price drop below $90,000 triggered a sell-off in US spot ETFs and sent Strategy’s stock plummeting. This caused some concerns about the sustainability of its aggressive Bitcoin accumulation strategy. Despite volatility, analysts are still optimistic about Strategy’s long-term prospects. GameStop received a proposal from Strive Asset Management urging it to also allocate its cash reserves into Bitcoin. ECB Adviser Criticizes Bitcoin’s Economic Utility An adviser to the European Central Bank (ECB) recently reiterated the institution’s negative stance on Bitcoin (BTC), and countered discussions in the United States about the potential creation of a strategic Bitcoin reserve. Jürgen Schaaf , an ECB adviser, argued that national Bitcoin reserves are a risky idea, and said that the cryptocurrency lacks any real economic necessity or relevant usage compared to traditional reserves like oil and gas. Schaaf’s position is very similar to ECB President Christine Lagarde’s recent statements , in which she dismissed the possibility of Bitcoin being added to central bank reserves across Europe. According to Schaaf, strategic reserves typically serve a purpose beyond speculation, like stabilizing import prices or securing raw materials. He also pointed out that reducing public debt is a priority for Europe and the US rather than pursuing investments in volatile assets. Jürgen Schaaf The ECB adviser also mentioned Bitcoin’s extreme volatility, illicit use, and susceptibility to manipulation as reasons why it is unsuitable for central banks. He dismissed the notion that Bitcoin could stabilize the euro or provide any significant benefit to financial institutions by arguing instead that it will encourage speculation and wealth redistribution. Beyond Bitcoin, Schaaf ruled out the idea of central banks holding diversified crypto asset reserves, and stated that adding multiple cryptocurrencies will only amplify concerns about volatility and speculative exposure. He held firm that digital assets very often lack fundamental economic utility, making them an impractical choice for central banks. His remarks were made at a time of turbulence in the crypto markets, with $1.5 billion in liquidations recorded over the past 24 hours. Bitcoin also saw a sharp decline, and even dropped below $88,000 for the first time since mid-November. Despite the ECB’s skepticism, some Bitcoin advocates still argue that the crypto could play a role in managing national debt. Asset management firm VanEck suggested in December that the US could reduce its national debt by 35% over the next 24 years if it created a reserve of one million BTC. This estimation aligns with a bill proposed by Senator Cynthia Lummis, who has long advocated for Bitcoin’s adoption as a financial tool for the US government. On the other hand, skeptics are still concerned whether Bitcoin accumulation will actually have any meaningful impact on the country’s rising $35 trillion debt. Bitcoin Drop Hits Strategy’s Stock Price Just how volatile Bitcoin can be was brought to light by the latest market downturn. Shares of Strategy declined by close to 16% since the start of the year, thanks to Bitcoin’s ongoing market correction. The drop in the company’s stock price reignited concerns about the sustainability of its aggressive Bitcoin acquisition strategy. Strategy stock price over the past month (Source: Google Finance ) The Kobeissi Letter , a market analysis firm, pointed out that Strategy’s business model heavily depends on its ability to raise additional capital, using its growing Bitcoin treasury as collateral. Analysts warned that if the company’s liabilities were to surpass its assets significantly, its ability to secure more funding could be jeopardized. Despite these concerns, stock analysts are still optimistic about Strategy’s potential for a recovery. On Feb. 6, analysts at Benchmark raised the company’s price target to $650, due to their confidence that it will continue to aggressively raise capital to fuel its Bitcoin accumulation strategy throughout the year. Since 2020, Strategy spent more than $33 billion buying Bitcoin at an average cost of around $66,000 per coin, leading to an unrealized profit of more than $10 billion. The company financed its Bitcoin purchases through a mix of stock issuances and approximately $9.5 billion in convertible debt. With most of its debt not maturing until 2027 or later, Strategy faces minimal risk of being forced to liquidate its Bitcoin holdings due to short-term price fluctuations. The Kobeissi Letter mentioned that for the company to face financial distress, Bitcoin’s price will need to drop more than 50% from current levels and stay there beyond 2027. Bitcoin’s price action over the past 24 hours (Source: CoinMarketCap) On Feb. 25, Bitcoin fell below $90,000 for the first time since November of 2024, driven by sell-offs in US spot Bitcoin ETFs. That same day, Strategy’s stock plummeted by over 10% to around $245, which was a nearly 50% decline from its all-time high of $473 in November. The stock had surged last year after the company announced its ambitious plan to buy $42 billion worth of Bitcoin by 2027. Other companies that adopted similar Bitcoin treasury strategies, like Semler Scientific, also saw big declines, with Semler’s stock dropping more than 20% since the beginning of the year. Despite the recent downturn, Benchmark analysts are confident in Strategy’s ability to generate “Bitcoin yield,” which is a metric that assesses the ratio of BTC holdings to outstanding shares. They argue that Bitcoin yield, rather than market capitalization relative to net asset value, serves as a much more meaningful indicator of the company’s financial health. Strategy is aiming for a Bitcoin yield of 15% in 2025. Bitcoin Treasury Could Transform GameStop GameStop Corp recently acknowledged that it received a letter from Strive Asset Management urging the company to invest its $4.6 billion cash reserves into Bitcoin. CEO Ryan Cohen confirmed on Feb. 26 that he received the proposal from Strive CEO Matt Cole, who suggested GameStop use market offerings to fund additional Bitcoin purchases. The idea attracted reactions from many industry figures, including Swan Bitcoin’s John Haar who stated that such a move will shock traditional finance investors who dismissed both Bitcoin and GameStop as speculative assets. GameStop became a big name in the 2020 and 2021 meme stock frenzy, with its stock surging nearly 11,500% during that period. More recently, reports surfaced on Feb. 13 that the company was exploring investments in Bitcoin and alternative assets. Cole’s letter reinforced this, advising GameStop to buy more Bitcoin through equity issuances and convertible debt while cutting losses by shutting down underperforming stores and expanding its online presence. According to Cole, a Bitcoin treasury will transform GameStop from a meme stock into a market leader by offering a hedge against inflation and securing long-term shareholder value. He also recommended that GameStop avoid investing in other cryptocurrencies. Cohen’s engagement with the Bitcoin community raised speculation about GameStop’s potential shift in strategy, particularly after he was recently pictured with Michael Saylor, chairman of Strategy. Strategy’s approach has already inspired other firms like Metaplanet and Semler Scientific to follow suit.
