Is Strategy’s Bitcoin Bet Becoming a Dangerous House of Cards?

Strategy (MSTR) is the world’s largest Bitcoin company. Strategy’s average price for BTC purchases is $76,000 – and Bitcoin has recently traded lower. Is the model on the verge of failure?

For critical investors, MSTR has long been a red flag; the company’s massive Bitcoin purchases, financed by loans, are also considered high-risk by the rating agency S&P . But Strategy (formerly MicroStrategy) remains undeterred. Founder Michael Saylor announced just yesterday the acquisition of another 855 Bitcoins. This brings Strategy’s total holdings to 713,502 BTC, nearly 3.7 percent of all Bitcoins in circulation.

But now a problem is emerging that’s hard to ignore: Since the company began accumulating Bitcoin reserves in 2020, it has paid an average of $76,052 per BTC – and the price of the leading cryptocurrency even fell below $75,000 at times over the weekend. Is a bubble that Strategy itself inflated with Bitcoin about to burst?

Strategy is valued lower on the stock exchange than Bitcoin reserves

A familiar pattern is repeating itself on the stock market: the company currently has a market capitalization of around $45 billion via its MSTR stock, but its Bitcoin holdings are worth roughly $10 billion more at current market prices. Critics have long argued that this imbalance could force Strategy to sell BTC in the future to service credit lines.

But the recent Bitcoin price collapse has brought another problem for Strategy into sharp focus: Roughly half of its BTC reserves were acquired since December 2024, a historically high-price period. The financial advantages that Strategy had previously gained through relatively inexpensive Bitcoin purchases have now been almost completely eroded.

Saylor is reacting aggressively: In February, the company increased its interest rate offer for STRC preferred shares by a quarter of a percentage point to 11.25 percent, aiming to attract fresh capital, which should then flow into Bitcoin purchases.

Strategy’s Cash Reserve is intended to protect against Bitcoin price fluctuations

But what happens if the Bitcoin price curve doesn’t recover sustainably and Strategy’s losses continue to fall? In December, Strategys tarted building a cash reserve to ensure dividends and loan interest payments could be paid even during periods of low Bitcoin performance.

According to the company, this reserve now holds $2.25 billion, which should be sufficient to meet financial obligations for approximately 30 months, regardless of BTC price fluctuations. But what would happen after that is best left unexplored – if Strategy were to sell Bitcoin, domino effects, potentially leading to a massive crash, are foreseeable.

Conclusion: Strategy is playing with fire with its Bitcoin strategy

Anyone buying Strategy shares is taking on Bitcoin risks. The average price per Bitcoin that the company is required to report is another indicator that offers a deep insight into their risky calculations.

The traditional stock markets are accordingly penalizing MSTR with their valuations: Strategy shares have plummeted by around 60 percent in the last six months, while Bitcoin has only managed a 30 percent drop over the same period.

Even if you, as an investor, don’t invest in Strategy but prefer to hold Bitcoin yourself – don’t underestimate the house of cards Michael Saylor is building in the BTC market and why he absolutely needs rising Bitcoin prices as a foundation for it.

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(Featured image by Kanchanara via Unsplash)

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