Anything can be said about Strategy’s CEO and co-founder, Michael Taylorunless it is not a fervent believer of bitcoin (BTC). In recent years, his faith in the king crypto asset has moved him to transform the once software developer into a bitcoin treasury company. In the process, andhe value of the old MicroStrategy has multiplied exponentially (more than 3,000% between the end of 2019 and November 2024) and has led the company to be listed on important stock indices such as the Nasdaq. But the dream could be close to coming to an end. This week, Strategy announced the creation of a reserve worth 1.44 billion dollars to support the payment of its dividends and its debt. The intention, the company explained, is to cover at least twelve months of its dividends and increase coverage to 24 «or more.» Investors did not like the news, which caused a fall in shares that have accumulated a depreciation of more than 30% so far in 2025 and around 50% since October. And, according to CryptoQuant analysts, with the creation of this reserve, Strategy could have hinted that She’s in more trouble than she’s willing to admit..
A MODEL IN DANGER?
These falls have caused a strange circumstance: Strategy is worth less than its assets. Currently, the treasury’s market capitalization stands at $54 billion, while its 650,000 bitcoins, which represent 3% of the total supply, are worth approximately $56 billion. A sign that the market does not see Saylor’s strategy as clear. A strategy that has been, in some ways, simple: The company has based its stock market evolution on becoming the ideal vehicle to expose itself to bitcoin. To do this, the company has been selling expensive shares and placing cheap debt to buy more bitcoin. If bitcoin goes up, the equation works, everyone wins and the cycle begins again. The problem is that this scheme depends on the wheel continuing to spin forever…and now it seems to have punctured. And it is that Not all the money that Strategy has been raising has been used to buy bitcoin. Without going any further, in early October it announced that it had purchased bitcoins worth $22 million, just a portion of the $128 million raised from the sale of common stock and perpetual preferred stock. That is, that money was not used to buy bitcoin, but for other purposes. Maybe, plug holes.
Last July, Strategy announced the launch of a package of perpetual preferred shares under the ticker STRC. These stocks, which function similarly to a corporate bond, are designed for high returns. Strategy pays these dividends monthly in cash and has raised the annual profitability from 9% in July to 10.75% this past Monday, seeking to encourage its trading, limit its volatility… and keep one of its main financing lines alive. But it is not the only action of this type that Strategy issues. The company also offers STRK and STRD shares, which offer returns of over 12% in the case of the latter that are paid quarterly. According to ‘Fortune’ calculations, Strategy should disburse some 200 million dollars in dividends on December 31. For its part, MSTR common shares do not pay dividends and their profitability comes directly from the appreciation they experience. Furthermore, it has some $8 billion in convertible bonds with maturities beginning in September 2028. At the time, S&P noted that $5 billion of convertible debt was out of money (‘out of the money’), meaning they are trading below the conversion price. However, there is an option for debt holders to ask to be paid earlier, in September 2027. «Strategy appears to recognize a non-trivial probability of a deep or prolonged decline in bitcoin. Establishing a 24-month dollar cushion suggests expectation that bitcoin could remain sideways or decline for an extended periodand that capital markets could be less receptive to future share issues«explain the CryptoQuant experts.
A DEAD END?
Now we can see clearly the cage that has been built Strategy. In this model, shareholders agree to be diluted by issuing new shares because the number of bitcoins per share increases and the share appreciates. However, the current photo is quite different, as it appears that ordinary shareholders are being diluted to pay preferred shareholders. And the solution is not simple. In this crypto asset treasury model, Strategy does not generate cash if it does not sell its bitcoinssince these tokens do not generate interest—unlike ether (ETH)—or dividends, and you can’t sell your bitcoinsbecause their actions depend on them. Its software business does generate cash, but it is so unprofitable—it has made losses on several occasions—that it is insufficient to meet its obligations. «Right now we have about $60 billion in bitcoin reserves and about $8 billion in debt. The company pays about $800 million in dividends a year. In order to pay them forever and increase shareholder value, bitcoin would have to appreciate 1.36% annually. If he does, we win. If you don’t, the stock wouldn’t be a good investment.«, explained Saylor at the annual Binance conference, held this year in Dubai. In addition, three additional problems emerge. The first, that Strategy it is no longer the only indirect investment vehicle in bitcoin after the approval of exchange-traded funds (ETF) and the many imitators that have emerged, such as the Japanese Metaplanet. In second place, Bitcoin has lost 20% of its value between October and Novemberand December has not started in the best way either. In this regard, Strategy estimates that could lose $5.5 billion if bitcoin ends the year at $85,000.
And the third, that MSCI studies removing Strategy from its indices and other companies in which cryptocurrencies represent 50% or more of their assets. This decision will be announced on January 15. In anticipation, some companies have begun to dump their crypto holdings. This decision is especially important because, according to JP Morgan calculations, Some 9,000 million dollars of capitalization correspond to passive positions that replicate indices. If it were excluded, it could face selling pressure of up to $2.8 billion, rising to $8.8 billion if other indices exclude it. So, if you are unable to finance yourself, you cannot buy bitcoin. If bitcoin is not purchased and it does not revalue, the model stops making sense. And if the model stops making sense, shareholders can choose to force liquidation and break the wheel.
WILL THEY SELL THEIR BITCOIN?
In this context, Saylor has also launched a message that has put the market on alert. Known for his blind faith in bitcoin, even in the worst moments of the 2022 bear market, Saylor has emerged as a kind of bitcoin prophet who has staunchly defended a simple concept: ‘HOLD’That is, not selling bitcoin and weathering the storm as best as possible. Those times seem to be behind us, as Strategy’s CEO has acknowledged that he would no longer frown upon getting rid of part of his bitcoins if the company needed liquidity. To his investors, Saylor acknowledged that the company vwill sell «highly appreciated» bitcoin to pay its dividends and subsequently «continuously increase their bitcoin holdings» with the money they raise. Furthermore, he defended that the dollar reserve is a «battery». «We’re basically using a nuclear reactor to spin a generator and charge a battery,» he said, showing a green and orange spaceship with a bitcoin reactor at its core.
Slide from Strategy’s presentation in which he equates the company to a spaceship.Strategy However, Saylor cannot escape his own self-imposed rules. This is where the concept of mNAVa metric that compares the company’s enterprise value to the market value of its BTC holdings. This indicator gives investors a way to assess the extent to which the market assigns a premium or discount to their BTC treasury. Thus, a reading above one point implies that the market assigns a premium to the holdings, while one below one suggests a discount, which can be interpreted as a warning signal or an opportunity. The problem is that this metric no longer looks as good as it used to. A year ago, Strategy’s mNAV was around 2.45 points; Today, that metric stands at around 1.16, less than half. If this indicator falls below one, the company could be forced to sell part of its bitcoin, as acknowledged by CEO Phong Le. This Tuesday, CFO Andrew Kang tried to qualify Le’s words, stressing that Strategy is only considering selling bitcoin as a last resort and only if the mNAV remains below one for a «very long period.» Despite the general pessimism, CryptoQuant believes that, deep down, Strategy can be on the right path. Strategy’s shift from aggressive bitcoin accumulation to a more conservative, liquidity-focused approach coincides with bitcoin’s crash in 2025. So protecting your reserves—and your business model—requires some flexibility that your cash cushion can give you. «The change has important implications for the bitcoin market. On the one hand, Strategy’s reduction of marginal bitcoin buying softens a powerful demand channel that amplified previous bull cycles. On the other, the dollar reserve and the newly disclosed cover/sell ability significantly reduce the probability of stress-driven bitcoin sales, which ultimately supports long-term market stability,» notes CryptoQuant. Cosmo Jiang, partner at crypto-focused venture capital firm Pantera, acknowledges to Bloomberg that the pessimism surrounding cryptocurrency treasuries is temporary and that they are here to stay. They probably won’t all survive, he admits, but there will be «two or three big winners» for every big cryptocurrency. Despite everything, Strategy seems to posit itself as the champion of bitcoin, but Saylor’s complicated financial engineering could bring down his house of cards.
