A Deeper Look at Strategy’s Volatility and Its Path Forward
Strategy’s recent sharp decline, which wiped a significant amount from its market capitalization, has highlighted the inherent volatility of its business model. However, this very drop may be setting the stage for a potential rebound, driven by its colossal Bitcoin holdings and a clearing of legal overhangs. The company operates as a publicly-traded, leveraged bet on Bitcoin, a structure that creates both its high-risk profile and its unique appeal.
The core of the investment case for Strategy is its unprecedented accumulation of Bitcoin. The firm recently added another 390 BTC to its treasury, bringing its total holdings to 640,808 BTC, acquired at an average cost of $74,032 per bitcoin. With Bitcoin’s price trading significantly higher, this represents a massive unrealized gain on its balance sheet. The company fuels this accumulation through a complex capital structure, issuing various series of perpetual preferred shares—such as STRK, STRC, STRF, and STRD—as part of an ambitious plan to raise billions specifically for Bitcoin acquisitions. This relentless buying strategy is what transforms its stock, MSTR, into a turbocharged proxy for Bitcoin itself.
The Institutional Backdrop: A Mix of Validation and Caution
The broader market’s view of Strategy is a mixture of growing acceptance and warranted caution. In a landmark move, S&P Global recently assigned Strategy a B- credit rating. While this firmly places the company’s debt in “speculative” or “junk” territory, the mere act of receiving a rating from a major agency is a significant step. It provides a framework for institutional investors who are mandated to only invest in rated corporate debt, potentially opening the doors to a new class of capital. However, S&P’s analysis also underscores the risks, pointing to a “currency mismatch” where Strategy’s assets are in Bitcoin but its liabilities are in U.S. dollars, creating potential liquidity pressure in a downturn.
Simultaneously, a legal challenge that had been a concern for investors has largely dissipated. A shareholder lawsuit filed in May 2025, which alleged the company misled investors about its Bitcoin strategy, was mostly withdrawn by plaintiffs between August and September, removing a significant legal overhang from the stock.
Navigating the Investment Landscape
For treasury officers and traders, understanding the dynamics of MSTR is crucial. The stock is known to trade at a significant premium to its Net Asset Value (NAV), sometimes exceeding 100%, which is fueled by expectations of future Bitcoin accumulation and its role as a regulated equity proxy for Bitcoin exposure. This premium adds a layer of volatility on top of Bitcoin’s own price swings. Furthermore, the company’s substantial dividend obligations on its preferred shares, totaling over $640 million annually, represent a fixed cash flow burden that persists regardless of Bitcoin’s price performance.
The path forward for Strategy is inextricably linked to Bitcoin. The recent market shakeout, combined with clearer accounting of its Bitcoin gains and a receding legal threat, creates a narrative that firms like 10X Research believe could attract new buying interest. The next key indicators to watch will be the company’s subsequent quarterly reports and its ability to continue funding Bitcoin purchases through debt and equity issuance without overburdening its balance sheet.
