Bitcoin News Today: S&P Flags Bitcoin's Volatility as Strategy's Liquidity Risks Drive Junk Rating

S&P Global Ratings has assigned a B- "speculation grade" issuer credit rating to Strategy, a firm known for its heavy exposure to Bitcoin, citing concerns over its narrow business focus, limited U.S. dollar liquidity, and significant financial risks tied to the volatile cryptocurrency. The downgrade, announced on October 27, 2025, underscores the agency's view that Strategy's business model—centered on holding Bitcoin as a reserve asset—poses substantial challenges in terms of liquidity and capital structure stability, according to a Miami Daily report.

The rating reflects a "currency mismatch" between Strategy's U.S. dollar-denominated debt and dividend obligations and its primary asset, Bitcoin, which S&P warns could create liquidity strain if the cryptocurrency's price declines. The firm currently holds approximately $8 billion in convertible debt, with $5 billion of that currently out of the money, and faces $640 million in annual preferred dividends. S&P noted that the company plans to fund these obligations through at-the-market equity sales, but emphasized that its reliance on capital markets and Bitcoin's volatility remain critical risks, the report added.

Strategy's treasury, valued at over $73 billion in Bitcoin, far exceeds its debt obligations, yet S&P highlighted the company's "significantly negative" risk-adjusted capital (RAC) ratio as of June 30, 2025. The agency calculates this metric by subtracting Bitcoin's market risk from equity value, a factor that contributes to its weak capital profile. Additionally, Strategy's cash flow was negative $37 million in the first half of 2025, with most pre-tax earnings derived from unrealized gains on its Bitcoin holdings—assets the report noted do not generate cash flows.

The ratings agency also flagged the potential for liquidity pressures if Bitcoin prices fall before the maturity of its debt in 2028. S&P acknowledged Strategy's history of prudent debt management but warned that a sharp decline in Bitcoin's price or reduced access to capital markets could trigger a downgrade. Conversely, a higher rating would require improved dollar liquidity, reduced reliance on convertible debt, and demonstrated resilience in capital markets under Bitcoin price stress, the Miami Daily piece said.

Strategy's business model, which involves acquiring and holding Bitcoin as a reserve asset funded by equity and debt, has drawn scrutiny for its concentration risk. While the company operates a smaller, breakeven software analytics division, its Bitcoin-centric approach dominates its credit profile. S&P's report indicated that the rating could open doors for high-risk, high-yield credit funds but also exposed the firm's vulnerability to market fluctuations, according to the same coverage.

The downgrade comes amid broader market uncertainty for Bitcoin, which has seen significant price swings in recent months. Strategy's management has not publicly commented on the S&P rating but has previously emphasized its long-term commitment to Bitcoin as a store of value. The company's future credit trajectory will likely hinge on Bitcoin's price stability and its ability to maintain access to capital markets despite its speculative profile, the report concluded.