Is Strategy's Bitcoin Accumulation Strategy Still a High-Conviction Buy in a Downturning Market?

The Bitcoin treasury model, once hailed as a revolutionary approach to corporate capital allocation, now faces its most rigorous stress test. As the market grapples with a 29% decline in Bitcoin's price from its October 2025 peak, the financial engineering underpinning firms like Strategy (formerly MicroStrategy) has come under intense scrutiny. This article evaluates whether Strategy's capital-intensive Bitcoin accumulation strategy remains a high-conviction investment, focusing on its sustainability amid collapsing stock multiples, deteriorating yield structures, and the looming threat of forced asset sales.

The Fractured Flywheel: A Model in Reverse

Strategy's ascent as the poster child for Bitcoin treasury companies was built on a self-reinforcing cycle: raise capital via equity or debt, purchase Bitcoin, and leverage rising stock prices to secure further funding. This "leveraged flywheel" has driven the company to amass 650,000 BTC by late 2025, representing a 3.2% stake in the total Bitcoin supply. However, the October price drop has shattered this dynamic. The firm's multiple to net asset value (mNAV)-a critical metric for assessing the premium investors pay for its equity-has collapsed from a peak of 3.9× in November 2024 to 1.15× in December 2025. When mNAV dips below 1, the company's equity value falls below the intrinsic value of its Bitcoin holdings, creating a scenario where forced sales become a real risk.

The structural fragility of this model is further exposed by Strategy's debt profile. The company has raised $9.48 billion in debt and $3.35 billion in preferred equity to fund its Bitcoin purchases. With a "static bankruptcy threshold" of $23,000 per Bitcoin, any further price decline could trigger a liquidity crisis. This threshold, which has risen from $12,000 in 2023 due to increased leverage, underscores the growing risk of insolvency if Bitcoin's price remains volatile.

ROI in the Red: Paper Gains vs. Unrealized Losses

While Strategy's Bitcoin holdings remain a paper gain of 22% over its $48 billion cost basis, the reality is more nuanced. Approximately 40% of its recent purchases-specifically, 8,178 BTC acquired at $102,171 each-are now underwater, representing an $88 million unrealized loss. This discrepancy highlights the asymmetry of Bitcoin's price action: while the asset's long-term upside remains intact, short-term volatility has eroded the profitability of recent accumulation.

The firm's return on investment (ROI) is further complicated by its capital-raising strategy. Strategy's reliance on at-the-market equity issuance and convertible debt has led to a 300% increase in diluted share count since 2020. This dilution has muted share price appreciation, with the stock down 76% year-to-date despite Bitcoin's 22% paper gain. The disconnect between Bitcoin's performance and Strategy's stock price reflects a broader market skepticism toward the sustainability of the treasury model according to recent analysis.

Yield Deterioration and the Debt Overhang

The yield structure of Bitcoin treasury companies has deteriorated sharply post-October 2025. Strategy's preferred shares, which once offered a 7.5% dividend yield, now carry a 10.5% rate to attract investors. This increase is a double-edged sword: while it provides short-term liquidity, it also signals a loss of confidence in the company's ability to service debt without selling Bitcoin. The CEO's recent admission that the firm might sell Bitcoin to meet dividend obligations has only deepened concerns about forced asset sales, which could further depress Bitcoin's price and create a negative feedback loop.

The debt wall looming in 2027 and 2028 adds another layer of risk. With $9.48 billion in debt maturities and clustered put options from investors, Strategy will need to raise capital through equity or asset sales. In a downturn, this could force the company to offload Bitcoin at fire-sale prices, compounding losses for both the firm and the broader market.

Regulatory and Market Sentiment Shifts

Regulatory developments have also shifted the landscape. The U.S. GENIUS Act and EU's MiCA framework have created more predictable environments for institutional Bitcoin adoption, but they have not insulated treasury companies from market volatility. The potential exclusion of Strategy from MSCI benchmarks- a move that could reduce institutional demand for its stock-further illustrates the sector's fragility.

Conclusion: A High-Risk, High-Reward Proposition

Strategy's Bitcoin accumulation strategy remains a high-conviction bet, but its viability hinges on three critical factors:
1. Bitcoin's Price Trajectory: A sustained rebound above $100,000 is necessary to restore mNAV above 1 and reduce the risk of forced sales.
2. Capital Structure Resilience: The firm must avoid dilutive equity issuance and restructure its debt to extend maturities beyond 2027.
3. Regulatory Clarity: Continued regulatory support for Bitcoin ETFs and institutional adoption will determine whether the sector can weather the current downturn.

For investors, the key takeaway is that Strategy's model is no longer a guaranteed alpha generator. While the asymmetric upside of Bitcoin remains, the leveraged nature of the treasury strategy has introduced systemic risks that demand careful risk management. In a market where 60% of corporate Bitcoin treasuries are already underwater, the question is no longer whether Bitcoin is a good investment-but whether the companies holding it can survive the next leg of the bear market.