Bitcoin News Today: S&P Downgrade Exposes MicroStrategy's Bitcoin-Driven Liquidity Quandary

MicroStrategy (MSTR) shares fell nearly 5% to $263 on Thursday, extending a 40% decline since July as the company prepares to release its quarterly earnings report amid heightened scrutiny over its Bitcoin-driven strategy, according to a Benzinga report. The stock's drop follows a junk-bond rating downgrade from S&P Global Ratings, a move highlighted by a GuruFocus report, which cited the company's heavy exposure to Bitcoin and structural liquidity risks. Despite recent Bitcoin purchases and a rebranding to "Strategy," the firm's financial health remains tied to the volatile cryptocurrency, with analysts divided on its long-term sustainability in a TradingView article.

S&P Global Ratings downgraded MicroStrategy to a speculative-grade B- rating, marking the first time a "Bitcoin treasury" company has received such a designation, the GuruFocus report noted. The agency highlighted the firm's $74 billion in Bitcoin holdings—acquired through $15 billion in convertible bonds and preferred stock—while warning of currency mismatch risks and potential forced sales if Bitcoin prices fall, according to the same GuruFocus coverage. The company's balance sheet is overwhelmingly Bitcoin-centric, with obligations denominated in U.S. dollars, creating a precarious financial structure, as detailed in the TradingView piece. S&P also noted that $5 billion in "out-of-the-money" convertible bonds mature in 2028, compounding pressure as the firm must pay $640 million annually in preferred stock dividends starting in October 2025, the GuruFocus analysis added.

Despite these risks, MicroStrategy continued its aggressive Bitcoin accumulation, purchasing 390 coins for $43.4 million in the week ended October 26, according to a Benzinga update. The acquisition, funded through at-the-market sales of perpetual preferred stock, brings total holdings to 640,808 Bitcoin, valued at approximately $73.7 billion, a figure reported in a Yahoo Finance article. The company's average purchase price of $74,032 per coin remains significantly below the current market value of $115,100, suggesting a profitable position, according to a GuruFocus update. However, analysts caution that the leveraged exposure amplifies downside risks if Bitcoin's price reverses, as discussed in an AskTraders preview.

The firm's earnings report, set for release after market close, will scrutinize its AI-driven business intelligence initiatives and financial performance, the AskTraders preview explains. While Q3 revenue is projected at $116.93 million—a modest 0.7% year-over-year increase—analysts expect a dramatic turnaround in earnings per share (EPS), potentially rising from -$1.72 to $9.67, the AskTraders analysis notes. The company's recent launch of "Mosaic," an AI-powered analytics platform, aims to diversify revenue streams, but its contribution remains a small fraction of the overall valuation, according to the same AskTraders preview.

Technical indicators suggest MSTR is testing critical support near $260, with a break below this level potentially accelerating losses toward $240, as the Benzinga report observed. Conversely, a rebound above $305–$320 could signal a recovery. The RSI near 43 and subdued trading volume reflect market hesitation ahead of a potential breakout, a point also raised in the Benzinga update about recent Bitcoin purchases.

Analysts remain polarized. TD Cowen reaffirmed a $620 price target (114% upside from recent levels), citing Bitcoin's mainstream adoption and MicroStrategy's dominance as the largest public holder, according to the TradingView article. However, others warn of overreliance on crypto, with Cantor Fitzgerald lowering its target to $680 in July and TD Cowen reducing it to $1,450 in September, as noted in the AskTraders preview. S&P's downgrade and the company's dwindling net asset value premium—now nearly erased—have intensified concerns about its leveraged strategy, a point raised earlier by the Benzinga report.