Saylor’s Bitcoin Flywheel Hits a Snag

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In 2020, Strategy (MSTR, formerly known as MicroStrategy) was a sleepy but profitable software company.

They had a bunch of cash sitting around, and no idea what to do with it.

Interest rates were near 0%. And the company’s CEO, Michael Saylor, expected inflation to become problematic.

So where could the company stash its cash? Saylor and his team looked into various alternative assets. Gold, real estate, bonds, and even Bitcoin. After some research, they decided on Bitcoin.

In August of 2020, the company made its first purchase of 21,454 Bitcoin for a total of $250 million. That’s a purchase price of $11,652 per coin.

A Beautiful Plan (At First)

Investors loved Saylor’s plan. MSTR shares shot up from around $14 to $130 in about six months.

Of course, Bitcoin was rising simultaneously. Partially due to Strategy’s buying, but also because the world saw how much governments were spending during the COVID era. Inflation was spiking, and the “debasement” trade was beginning.

But the remarkable thing was that MSTR was actually outperforming Bitcoin. The stock was booming.

Back in 2020, there was no Bitcoin ETF. To buy cryptocurrency, you had to open a crypto account and do it the old-fashioned way.

Most professional investors had no way to access the Bitcoin trade before Strategy. Their companies didn’t allow them to buy cryptocurrencies. But they could buy Strategy, a company that owned Bitcoin.

Both retail and institutional investors jumped on the Saylor bandwagon. And they wanted Saylor to go big.

The company sold debt to buy more Bitcoin. There was insatiable demand for Strategy’s stock and convertible bonds.

Forbes proclaimed Saylor as “The Bitcoin Alchemist” in a flattering cover story in January, 2025.

Source: Forbes

Bitcoin ETFs Disrupt Strategy

In January 2024, a bunch of Bitcoin ETFs launched. Now all investors, both institutional and retail, could access pure Bitcoin exposure through the stock market.

There is no leverage in Bitcoin ETFs. They simply hold Bitcoin, charge a small fee, and offer investors an easy way to buy.

So one of the main reasons that investors bought Strategy (MSTR) had disappeared. They could simply buy the iShares ETF (IBIT), pay a tiny expense fee, and avoid all the overheard expenses and debt at Strategy.

Bitcoin ETFs were a smashing success, and threatened Strategy’s business model.

So Saylor and his team got more aggressive.

Massive Buys

Strategy issued billions of dollars worth of MSTR shares, convertible notes, and a new idea – preferred shares.

The first Strategy preferred stock was STRC, which launched in July 2025 with a handsome 11.5% dividend yield. They sold STRC to investors so MSTR could buy even more Bitcoin.

The idea was that Bitcoin should return much more than 11.5% per year, so it was a good deal for Strategy shareholders. And STRC investors would earn a very high yield.

STRC was a success, at first, so Strategy launched more preferred shares. STRD, STRK, and STRF followed. All had a different yield, and different terms on the dividend payments.

In total, Strategy has now issued $15.5 billion in preferred shares. The cost to pay dividends on those shares is about $1.7 billion per year.

MSTR holds around $50 billion worth of Bitcoin. Here’s a chart showing all of Strategy’s Bitcoin buys:

Source: Strategy

Look at all those buys above $90,000, all the way up to over $120,000… Risky.

The company’s average purchase price on their 847,000 BTC is now around $75,000. The problem is that Bitcoin itself is now trading around $59,000.

Strategy is now underwater on its Bitcoin purchases.

And it has to cover $1.7 billion worth of dividends per year. Strategy also has around $6.7 billion worth of convertible debt outstanding. Some of that will need to be refinanced in 2027/2028, which could be complicated if the company is still struggling.

Juggling Molotov Cocktails

This morning, Strategy made a major announcement. They are now considering selling up to $1.25 billion worth of Bitcoin, and using the proceeds to cover dividend payments and debt interest.

For years, Michael Saylor said the company would never sell its Bitcoin. But now they’re at the point where there’s essentially no other choice.

MSTR has boosted its cash reserve to $2.55 billion, which is enough to cover about 17 months of interest and dividend payments.

It’s a start. And shares are up 12% today. But there are still major risks for MSTR. If Bitcoin continues to fall, they may be forced to sell more coins. This could create a nasty cycle of lower prices leading to more selling.

And considering the fact that Strategy owns 847,000 coins, which is 4% of the world total, this cycle could potentially lead to much lower Bitcoin prices.

Additionally, there are now a lot of other companies imitating Strategy’s Bitcoin-centric plan. The “Bitcoin Treasury” strategy has spread around the world, magnifying the risk.

Strategy shares (MSTR) are now down 83% from the all-time high. STRC, which is supposed to trade around $100, sits at $82.

The Perils of Leverage

The Strategy story is a cautionary tale about leverage and aggression. Saylor wasn’t patient enough with his Bitcoin buys. He was also overly-eager using debt to fund purchases.

It almost seems like he thought his company could keep Bitcoin prices heading higher eternally.

Last summer, Michael Saylor got some criticism for “buying the top” in Bitcoin. He replied that he would be “buying the top forever.”

But nobody is bigger than the market.

If you want to own Bitcoin, I say just buy an ETF like FBTC, or open a crypto account. There’s really no need to buy MSTR anymore. At some point, if the company gets in deep trouble, the shares may get low enough to interest me. But for now I’m steering clear.

Strategy’s preferred shares (STRC, STRK, STRD, etc) may also become attractive at some point. Fat yields are always interesting to me. But there’s too much risk for now. Strategy could eventually get to the point where they skip dividends in order to preserve their Bitcoin stash.

Buy Bitcoin When it Looks Dead

To be clear, I think Strategy will survive. They may have to dilute shareholders, and sell a bunch of Bitcoin, but I think the company will make it through this crisis.

BUT… There’s a chance this thing unravels and they’re forced to sell a large portion of their Bitcoin at fire-sale prices. If that happens, it could crash BTC for a while.

If Bitcoin ever gets down to the $20k level or so, I’d probably buy some. That’s the thing about Bitcoin though. The only great time to buy is when it looks like the project is dying. And most people won’t do that.

Even if Strategy crashes and burns (which isn’t my expectation), Bitcoin will survive. It’s been through this type of event many times before.

So if Strategy ever does fall apart, my advice would be simple. Buy Bitcoin when it looks like all hope is lost. It’s a proven technique, but is psychologically difficult for most people. If we ever get to the point, I’ll let you know.

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