Will the financial stability of Strategy companies truly be shaken during Bitcoin declines?

Bitcoin (BTC) is currently trading around 90.44K and has recorded a slight increase (+0.22%) over the past 24 hours. However, in the cryptocurrency market, active discussions continue among market participants about how a potential price correction of BTC to $74,000 could impact Strategy, a large institutional holder.

The Truth Told by Numbers: Is a Bankruptcy Scenario Realistic?

According to expert analysis, Strategy’s financial situation is more robust than it appears. The company currently holds an enormous amount of cryptocurrency assets on its balance sheet—672,497 BTC, worth approximately $58.7 billion. Its liabilities are only about $8.24 billion.

Even in a pessimistic scenario where Bitcoin drops to $74,000, the company’s Bitcoin holdings would still be valued at about $49.76 billion. This figure significantly exceeds its liabilities, making the risk of bankruptcy mathematically very low.

What Does a No-Collateral Structure Mean?

An important point is that Strategy does not carry Bitcoin debt backed by collateral like traditional hedge funds. The company’s borrowings are unsecured convertible bonds, which do not face forced liquidation risks during a cryptocurrency downturn.

In other words, no matter how rapid the price correction, lenders do not have the legal right to seize Bitcoin assets. Experts generally agree that the company’s business logic should not be directly equated with that of traditional collateralized debt.

Is Liquidity Concern Overblown?

Another concern is the potential sale of Bitcoin due to liquidity shortages. However, Strategy has secured USD reserves of $2.188 billion, which is about 32 months’ worth of its annual dividend payout estimate of $750–800 million. The company has ample capacity to meet short-term cash needs.

The Real Reason Behind the Stock Price Decline

An interesting contradiction arises here. Despite strong corporate fundamentals, Strategy’s stock (MSTR) has not shown the expected rise and is currently around $157. This is due to structural market factors.

In October 2024, the MSCI index proposed a new regulation excluding companies holding more than 50% of their assets in Bitcoin. This decision is scheduled to be finalized by January 15, 2026, raising concerns about forced sell-offs from index-tracking funds.

Furthermore, major investment banks have increased Strategy’s margin requirement from 50% to 95%, forcing institutional investors to reduce their positions and amplifying selling pressure.

The Blind Spot of Excessive Dilution

While the balance sheet remains healthy, there are unavoidable risks. Strategy has been issuing new shares continuously to increase its Bitcoin holdings. Excessive issuance during a downtrend could accelerate dilution and undermine existing shareholders’ value.

Of particular concern is the scenario where dilution reduces the net asset value (NAV) ratio below 1. If this level is reached, the company’s ability to raise new capital through share issuance would be severely limited, potentially forcing a fundamental shift in its growth strategy.

The short-term price correction risks in the cryptocurrency market and the long-term structural challenges at the corporate level should be recognized as separate issues.