Bitcoin (BTC) bomb: 712,000 BTC sparks massive remortgage fears

The current strategy consumes more than three and a half times the daily production of Bitcoin (BTC), causing both positive and negative reactions in the cryptocurrency industry. The company has sparked debate about its BTC buying strategy as it continues to buy large amounts of BTC, leaving people wondering whether it is actual Bitcoin or debt-backed assets.

The company bought 2,932 BTC for $264 million on January 26, increasing its total holdings to 712,647 BTC. The company has acquired almost four times the amount of BTC mined around the world by 2026. The market should have reacted to this supply shock, according to logical reasoning. The price of BTC has remained constant, causing people to doubt its value.

The market observed this unusual price movement, which raised doubts about the full on-chain support of Strategy’s BTC positions.

Also read: Strategy acquires 2,932 Bitcoin, increasing holdings to over 712,000 BTC

Bitcoin ownership under scrutiny

The dispute began when Jameson Lopp, co-founder of Casa and working as a cypherpunk, expressed doubts about Strategy’s ability to manage Bitcoin assets that have no financial constraints. Lopp during his X-post expressed doubts about Strategy’s ability to prove that its Bitcoin assets remain under their control.

Rehypothecation occurs when custodians or brokers reuse customer assets to generate returns or collateral for other transactions, leading to multiple paper claims on the same BTC asset. The original owner loses access to his funds when the custodian is unable to conduct his activities, as this situation creates multiple claims on the same BTC asset. The situation turned out to be true when FTX, Celsius and BlockFi suffered their operational failures.

The term ‘real Bitcoin’ in this situation refers to digital currency that exists on known blockchain addresses that prevent third parties from making claims. The concept of ‘rehypothecated Bitcoin’ indicates that the same digital asset exists as collateral for multiple agreements because the system relies on trust rather than cryptographic verification.

Bitcoin, Saylor and Proof-of-Reserves Debate

Michael Saylor quickly pushed back against the accusations he faced. He stated that Strategy controls its managers and explicitly rejects remortgage. The company maintains its BTC holdings through full ownership, which prevents any lending and allows third parties to confirm their holdings.

Lopp argued that Strategy relies on third-party custodians, including Fidelity and Coinbase Prime. This casts doubt on Saylor’s ability to protect BTC from lending through hidden operations by these organizations.

The main conflict between the two sides revolves around their need to provide proof of reserves. Critics need more transparent cryptographic evidence to confirm that Strategy’s BTC assets are fully owned by the company and not represented as IOUs that resemble digital gold.

The ongoing debate over BTC demonstrates a fundamental asset principle that states that people should not trust anything without conducting their own verification process.

Also read: Strategy Buys 22,305 BTC After $2.13 Billion Spending and Signals More Buys