Strategy holders may find themselves exposed to risk under Saylor’s bold financial plays.

Strategy’s Bitcoin Gamble Faces Its First True Stress Test

After five years of accumulating bitcoin with near-mythic zeal, Strategy (formerly MicroStrategy), under the leadership of Executive Chairman Michael Saylor, may be approaching a critical inflection point.

As of now, the company holds 506,137 BTC, valued at approximately $44 billion with bitcoin trading near $87,000. But following a sharp decline from its recent all-time high of over $109,000, concerns are mounting. The firm’s aggressive recent purchases have elevated its average purchase price to roughly $66,000 per bitcoin—meaning that any further sustained pullback could push Strategy’s holdings into negative territory.

Financial Maneuvers Powering Bitcoin Accumulation

Saylor’s long-term bitcoin thesis has been underwritten by complex financial instruments. Strategy has raised capital through:

• Traditional equity issuance – selling new shares of MSTR to fund BTC buys,
• Convertible debt – allowing debt holders the option to convert to equity,
• Preferred stock offerings – with guaranteed dividends, appealing to yield-seeking investors.

While this multi-pronged funding approach has enabled substantial bitcoin accumulation, it also comes with liabilities—namely, regular dividend and interest payments, which Strategy’s legacy software business struggles to cover.

With preferred shares like STRK (8% yield) and STRF (10% yield) now in play, and convertible notes carrying a modest 0.4% average interest, the company’s financial obligations are ballooning—raising questions about long-term sustainability.

Investor Caution Mounts

Despite the seemingly low risk of forced liquidation—thanks to non-collateralized debt structures and a conservative stance on margin use—some analysts warn that Strategy may eventually be forced into further dilutive equity sales to service its financial stack.

“If bitcoin stagnates or declines, Strategy might need to keep selling equity to stay liquid, which would likely erode shareholder value,” said Quinn Thompson, founder of crypto hedge fund Lekker Capital. “At that point, issuing more shares might not be accretive—it might hurt.”

Saylor no longer holds controlling voting power at the firm following continued dilution in 2024. That opens the door for activist investors to potentially step in if market conditions deteriorate.

Structural Fragility

Adding to the risk are leveraged ETFs like MSTX and MSTU, which have amassed over $3 billion in MSTR exposure. These funds, by design, buy more MSTR shares as capital flows in, creating an artificial buying pressure. But should that flow reverse, the impact on Strategy’s share price could be swift and severe.

“This type of ETF-driven demand is fragile,” Thompson noted. “If the music stops, MSTR could experience heavy selling pressure without a clear floor.”

Strategy’s Capital Seesaw

According to Jeffrey Park, Head of Alpha Strategies at Bitwise, the company’s capital structure reflects a deliberate attempt to appeal to a wide range of investor risk appetites. Equity and convertibles attract high-risk traders, while preferred shares court conservative income-focused investors.

“Think of Strategy’s capital stack like a seesaw,” Park explained. “Market sentiment shifts value between instruments, but the overall enterprise value remains constant—it’s the perception and positioning that move.”

Final Thought

Michael Saylor’s unwavering belief in bitcoin has reshaped corporate treasury strategy—and made Strategy a poster child for crypto maximalism. But with rising funding costs, diminishing cash flow, and a volatile macro backdrop, even Saylor’s boldest supporters are watching closely.

The company may not be in immediate peril, but its strategy is being stress-tested. The next few quarters will reveal whether Strategy’s financial innovation is a stroke of genius—or a ticking time bomb.