Is MicroStrategy (MSTR) Still a Buy Amid Bitcoin's Downturn?

The question of whether MicroStrategy (MSTR) remains a viable investment in the face of Bitcoin's recent volatility hinges on a nuanced evaluation of its financial resilience, strategic positioning, and the evolving dynamics of its role as a leveraged Bitcoin proxy. While Cantor Fitzgerald reduced its price target for MSTR-from $560 to $229-has cast a shadow over the stock's near-term prospects, the company's Q3 2025 financial results and long-term Bitcoin thesis suggest a more complex picture.

Financial Resilience: Liquidity, Debt, and Capital Structure

MicroStrategy's Q3 2025 financial report reveals a company with robust liquidity and a relatively conservative debt profile. As of September 30, 2025, the firm held $54.3 million in cash and cash equivalents, up from $38.1 million as of December 31, 2024. Total debt stood at $8.2 billion, with a debt-to-equity ratio of 14.1%, indicating a capital structure that, while leveraged, is not excessively so by traditional standards.

The company's aggressive Bitcoin accumulation-now totaling 641,000 BTC, or nearly 3% of Bitcoin's finite supply-has been funded through $21 billion in securities offerings in 2025. However, this strategy has introduced structural challenges, including equity dilution and reliance on convertible debt. Institutional investors have taken note: BlackRock, Vanguard, and Fidelity collectively reduced their MSTR holdings by $5.4 billion in Q3 2025, reflecting a shift toward direct Bitcoin ETF exposure as a "cleaner" alternative.

Bitcoin's Long-Term Potential vs. Short-Term Volatility

Despite Bitcoin's recent downturn, MicroStrategy's financials underscore its role as a leveraged proxy for the cryptocurrency. The company's Q3 2025 operating income of $3.9 billion was driven by a $3.9 billion unrealized gain on its Bitcoin holdings, while its core software business reported $128.7 million in revenue-a 10.9% year-over-year increase. This duality-where Bitcoin's price swings dominate earnings while the core business shows incremental growth-highlights both the opportunity and the risk inherent in MSTR's strategy.

To mitigate Bitcoin's volatility, MicroStrategy has established a $1.44 billion USD reserve, a buffer that Cantor Fitzgerald notes could fund dividends for 21 months even if Bitcoin prices fell by over 90%. This contingency planning suggests a recognition of the asset's inherent instability, though it does not eliminate the risks of further capital-raising challenges or equity dilution.

The company's balance sheet has also benefited from these reserves. Cantor Fitzgerald has noted that the firm’s leverage remains within acceptable bounds when factoring in Bitcoin’s current market value and the USD buffer, though it remains a leveraged bet.

This downgrade underscores a broader market skepticism about MSTR's sustainability as a leveraged Bitcoin proxy. The company's core business, which generates just 1.7% of its total revenue from software, remains a weak anchor for long-term value creation. Meanwhile, the aggressive use of convertible debt and equity issuance has eroded shareholder value, with Q1 2025 core business revenue declining 3.6% year-over-year.

Strategic Risks and Institutional Shifts

Beyond Bitcoin's price action, MicroStrategy faces structural headwinds. The shift by institutional investors toward direct Bitcoin ETFs-a trend Cantor Fitzgerald explicitly notes-signals a loss of MSTR's unique value proposition as a proxy. This institutional disengagement, coupled with the risk of MSCI index removal, could exacerbate liquidity pressures and further depress the stock's valuation.

Moreover, the company's capital-raising efforts have become increasingly challenging. While it raised $5.1 billion in Q3 2025 through capital markets programs, the broader market's appetite for MSTR's debt and equity appears to be waning. This raises questions about the sustainability of its Bitcoin accumulation strategy in a prolonged bear market.

Conclusion: A High-Risk, High-Reward Proposition

MicroStrategy's long-term viability as a leveraged Bitcoin proxy depends on two critical factors: Bitcoin's ability to recover and appreciate meaningfully, and the company's capacity to maintain its capital structure without further diluting shareholders. While its Q3 2025 results demonstrate financial resilience-$3.9 billion in operating income and a $1.44 billion USD buffer-these metrics are inextricably tied to Bitcoin's performance.

For investors with a long-term horizon and a high tolerance for volatility, MSTR could still offer exposure to Bitcoin's potential upside at a leveraged multiple. However, the risks-equity dilution, institutional disengagement, and the threat of index removal-cannot be ignored. Cantor Fitzgerald's price target cut serves as a cautionary signal, even as the firm acknowledges Bitcoin's long-term momentum.

In the end, MicroStrategy remains a speculative bet on Bitcoin's future, not a diversified investment. For those who believe in the cryptocurrency's eventual dominance over gold in market capitalization, MSTR could still be a buy. But for others, the risks may outweigh the rewards.