Strategy Inc. (formerly MicroStrategy) spent 2025 building the largest corporate Bitcoin reserve the public markets have ever financed, but the scale of that ambition ended up colliding with the logic of its own stock.
What began as an aggressive accumulation strategy, powered by the company’s appetite for leverage and a willingness to dilute existing shareholders, evolved into a structural contradiction that now defines the firm.
A balance sheet swollen by Bitcoin, but a narrative stretched to breaking
Strategy has raised $21 billion across seven securities offerings in a single year to expand its holdings to roughly 641,000 BTC, a figure that now represents close to 3% of the asset’s finite supply.
Yet as the balance sheet grew to historic proportions, the equity story unraveled, leaving the stock 68% below its highs and forcing investors to reassess what kind of company they were actually buying into.
The shift did not happen suddenly. Over the past two quarters, institutions pared their exposure from $36.32 billion to $30.94 billion, a $5.38 billion retreat that reflected broader risk rotation across the market but also genuine discomfort with Strategy’s financing model.
The company no longer trades like a software developer or a technology platform. It moves in near lockstep with Bitcoin itself, yet its capital structure behaves like an experiment in perpetual leverage.
Investors are confronted with an entity that generates multi-billion-dollar profits when Bitcoin rallies and multi-billion-dollar losses when it falls. For many, the volatility was tolerable. It was the dilution layered on top of it that proved untenable.
A year of capital that redefined a company
The mechanics underpinning Strategy’s transformation show how aggressively the firm leaned into its thesis.
The firm stated that it issued $11.9 billion in common equity, $6.9 billion in preferred equity, and $2.0 billion in convertible debt, and used the proceeds to fund a persistent bid for Bitcoin throughout the year.
The sequencing of these raises did more than enlarge the treasury; it recast the company’s identity. Each new round introduced more outstanding shares, weakened the claim of existing holders, and signaled that management prioritized reserve expansion over earnings stability or stock performance.
This approach might have been sustainable in a market that rewarded asymmetric exposure to Bitcoin’s upside.
But in a year when investors increasingly sought predictable cash flows and balanced operating models, Strategy’s structure made it difficult for large portfolios to justify continued exposure.
The company’s results are volatile by design, and its dilution is structural rather than cyclical. The combination pushed institutions toward firms with steadier fundamentals, leaving Strategy’s stock as a proxy for Bitcoin with a corporate wrapper attached.
Strategic custody realignment
The strategic shift extended beyond fundraising. Blockchain analysis platform Arkham Intelligence reported that Strategy moved roughly 58,000 BTC, about $5.1 billion, to Fidelity Digital Assets within two months.
It added:
“In total, Strategy holds 641,692 BTC ($56.14B) with a total of 165,709 BTC ($14.50B) sent to Fidelity Custody.”
The decision reflects a broader recalibration of operational risk. After years of relying primarily on Coinbase as its custodian, the company adopted a multi-provider model that better aligns with the expectations of lenders and credit analysts, who prefer diversified custody arrangements.
The change came with tradeoffs. Fidelity operates an omnibus custody structure that aggregates client assets on-chain.
This model improves redundancy and satisfies institutional counterparty expectations, but it removes the direct visibility that once allowed analysts to track Strategy’s holdings through identifiable wallet clusters.
In the earlier setup, the company’s solvency profile could be monitored by cross-checking public addresses against corporate disclosures.
The omnibus framework replaces this real-time transparency with custodian statements and internal audit controls, which provide security and operational strength but reduce the external interpretability that retail traders and on-chain researchers once relied on.
Assessing MicroStrategy’s Bitcoin Debt Coverage
As the company’s debt stack grew, management introduced an unconventional metric to reassure bondholders and defend the leverage.
The Strategy “Bitcoin (BTC) Rating” measures the coverage of the convertible notes by comparing the market value of the Bitcoin treasury to the face value of the debt.
This ratio was designed to simplify the credit conversation by focusing on asset coverage rather than earnings variability, and early data suggest that the buffer is substantial.
At a Bitcoin price of $74,000, which aligns with Strategy’s aggregate cost basis, the coverage stands at 5.9 times. Notably, even a significant drawdown to $25,000 reduces the coverage to only 2.0 times, which still exceeds the face value of the obligations.
For creditors, this framing provides comfort. The numbers indicate that Strategy retains significant collateral protection even in adverse scenarios.
Equity holders, however, see something different. The BTC Rating does not address the dilution required to sustain the treasury expansion, nor does it mitigate the volatility that directly flows into quarterly results.
Essentially, this shows that the firm’s creditors receive clarity on risk exposure, while shareholders absorb the structural consequences of continuous issuance.
The limits of the index system
The company’s unique financial profile also interacts awkwardly with index rules.
Strategy meets the market capitalization and liquidity thresholds for the S&P 500, but the index requires four consecutive quarters of positive earnings.
Because Strategy’s profits are mechanically tied to Bitcoin’s price fluctuations, the firm struggles to produce sustained earnings under the accounting framework S&P uses for eligibility.
In quarters where Bitcoin rises, Strategy’s reported profits soar. In quarters where Bitcoin retreats, the losses are equally significant. This volatility effectively bars the firm from the index and eliminates a substantial pool of passive demand that could otherwise support the stock.
That exclusion matters because Strategy’s liquidity and public float are ample enough that index inclusion would typically be a natural next step for a company of its size. Instead, the firm remains dependent on active investors who must evaluate the combined risks of leverage, dilution, and Bitcoin-linked earnings volatility.
The result is an increasingly bifurcated identity: a corporation that built a massive digital asset reserve financed through public markets, but whose equity value reflects the market’s skepticism about the sustainability of the strategy used to build it.
MicroStrategy’s reinvention
Strategy achieved something no other public company has attempted at this scale. It constructed a corporate Bitcoin reserve of unprecedented size, diversified its custodians, and engineered a novel debt coverage metric to stabilize its credit footprint.
The company proved that public markets would finance a multi-billion-dollar Bitcoin accumulation model and that operational infrastructure could evolve as quickly as its balance sheet.
What it has not secured is a stable equity narrative. Investors who once treated the stock as a leveraged proxy for Bitcoin now confront a capital structure that demands ongoing dilution to maintain its pace of accumulation.
Creditors feel protected by the asset coverage, while shareholders remain exposed to earnings swings and capital supply decisions. The market’s repricing reflects this tension.
The company delivered on its ambition to dominate the Bitcoin treasury landscape, but the approach that enabled it continues to weaken the very equity engine that funds it.
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