Strategy Inc. (formerly MicroStrategy) spent 2025 building the largest corporate Bitcoin reserve ever funded by the public market, but the scale of its ambitions ultimately clashed with the logic of its own stock.
What began as an aggressive accumulation strategy driven by the company’s desire for leverage and a desire to dilute existing shareholders has evolved into a structural contradiction that now characterizes the company.
Balance sheets were inflated by Bitcoin, but the story widened to collapse.
Over the course of the year, Strategy raised $21 billion in seven securities offerings, increasing its holdings to approximately 641,000 BTC, which currently represents nearly 3% of the asset’s finite supply.
But as the balance sheet grew to historic proportions, the stock story fell apart, sending the stock 68% below its all-time high and forcing investors to reevaluate what kind of company they were actually buying.
This change did not come suddenly. Over the past two quarters, the institution has reduced its exposure from $36.32 billion to $30.94 billion. This is a $5.38 billion contraction that reflects increased risk rotation across the market, but also reflects genuine discomfort with the strategy’s funding model.
The company no longer trades like a software developer or technology platform. Although it moves roughly in lockstep with Bitcoin itself, its capital structure works like an experiment in perpetual leverage.
Investors are faced with companies that generate billions of dollars in profits when Bitcoin rises and billions of dollars in losses when Bitcoin falls. For many, volatility was acceptable. It was the diluent layered on top that proved unsustainable.
A year of capital that redefined the company
The mechanism supporting the strategy transformation shows how aggressively the company has committed itself to its cause.
The company said it issued $11.9 billion in common stock, $6.9 billion in preferred stock, and $2 billion in convertible debt, and used the proceeds to fund ongoing Bitcoin bids throughout the year.
The sequence of these increases did more than just expand the treasury. It reshaped the company’s identity. The number of shares outstanding increased with each new round, weakening the claims of existing holders and suggesting that management was prioritizing reserve growth over earnings stability and stock price performance.
This approach may have been sustainable in a market that rewards asymmetric exposure to Bitcoin’s upside.
But in a year when investors increasingly sought predictable cash flows and balanced operating models, the strategy’s structure made it difficult for large portfolios to justify continued exposure.
The company’s performance is unstable by design, and its dilution is structural rather than cyclical. This consolidation drove institutional investors toward companies with more stable fundamentals, leaving Strategy stocks as a proxy for Bitcoin with a corporate wrapper.
Strategic Custody Realignment
The strategic shift wasn’t just about funding. Blockchain analytics platform Arcam Intelligence reported that the strategy transferred approximately 58,000 BTC (approximately $5.1 billion) to Fidelity Digital Assets within two months.
He further added:
“In total, Strategy holds 641,692 BTC ($56.14 billion), with a total of 165,709 BTC ($14.5 billion) transferred to Fidelity custody.”
This decision reflects a broader recalibration of operational risk. After years of relying primarily on Coinbase as its custodian, the company has adopted a multi-provider model that better aligns with the expectations of lenders and credit analysts who prefer diverse custodial arrangements.
This change came with a trade-off. Fidelity operates an omnibus custody structure that aggregates customer assets on-chain.
While this model improves redundancy and meets the expectations of financial institution counterparties, it removes the direct visibility that once allowed analysts to track a strategy’s holdings through identifiable clusters of wallets.
Previously, you could monitor a company’s solvency profile by matching its disclosures to its public address.
The omnibus framework replaces this real-time transparency with management statements and internal audit controls. These 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 mounted, management introduced unconventional metrics to reassure bondholders and protect leverage.
The “Bitcoin (BTC) Rating” strategy measures convertible bond coverage by comparing the market price of Bitcoin Treasury to the face value of the debt.
This ratio is designed to simplify credit discussions by focusing on asset ranges rather than earnings fluctuations, and early data suggests the buffer is substantial.
At a Bitcoin price of $74,000, which is consistent with the strategy’s total cost basis, the coverage is 5.9x. Notably, even a large drawdown to $25,000 reduces coverage by only 2.0x, but still exceeds the face value of the debt.
For creditors, this framework provides peace of mind. This number indicates that the strategy retains significant collateral protection even in adverse scenarios.
But stockholders see it differently. BTC ratings do not address the dilution necessary to sustain Treasury expansion, nor do they mitigate the volatility that directly impacts quarterly results.
This essentially indicates that a company’s creditors are clearly aware of their risk exposure while shareholders absorb the structural impact of continued issuance.
Limitations of the index system
The company’s unique financial profile also interacts awkwardly with the index’s rules.
This strategy meets the market capitalization and liquidity criteria of the S&P 500, which requires four consecutive quarters of positive earnings.
Because Strategy’s profits are mechanically tied to Bitcoin price movements, the company has struggled to generate sustainable profits under the accounting framework used by S&P to qualify.
In quarters where Bitcoin rises, Strategy’s reported profits skyrocket. In a quarter where Bitcoin pulls back, the losses are just as large. This volatility effectively locks the company out of the index, erasing a significant pool of passive demand that could have supported the stock price.
This exclusion is important because Strategy has ample liquidity and public equity, and index inclusion is usually the natural next step for a company of its size. Instead, the company continues to rely on active investors who must evaluate the combined risks of leverage, dilution, and return volatility associated with Bitcoin.
As a result, identities become increasingly polarized. A company has raised money through the public markets to build a huge digital asset, but the value of its stock reflects market skepticism about the sustainability of the strategy used to build it.
Reinventing MicroStrategy
This strategy accomplished something no other publicly traded company of this size had attempted. The company has built an unprecedented scale of corporate Bitcoin reserves, diversified its custodians, and designed a new debt coverage metric to stabilize its credit footprint.
The company has proven that the public market can fund a multi-billion dollar Bitcoin accumulation model and that its operational infrastructure can evolve as quickly as its balance sheet.
What has not been secured is a story of stable stocks. Investors who once treated stocks as leveraged proxies for Bitcoin are now faced with a capital structure that requires continued dilution to maintain the pace of accumulation.
While creditors feel protected by asset coverage, shareholders are still exposed to fluctuations in earnings and capital supply decisions. Market repricing reflects this tension.
While the company has achieved its ambition to dominate the Bitcoin treasury market, the approach that made it possible continues to undermine the very equity engine that funds it.
(Tag translation) Bitcoin
