Strategy's Bitcoin Investment Surges 21% to $51.5 Billion

Strategy, a software company, has made a significant investment in Bitcoin, purchasing approximately 597,000 bitcoins for $42.4 billion by the end of June 2025. This investment represents about 3% of the total Bitcoin supply and has resulted in a substantial profit, with the current value of these coins estimated at around $51.5 billion. However, this investment is not without its risks.

One of the primary risks Strategy faces is related to U.S. accounting rules, specifically ASU 2023-08, which requires companies to report the current value of Bitcoin on their books, even if it has not been sold. This fair value accounting could lead to taxes based on unrealized profits. Starting in 2026, Strategy may face a 15% Corporate Alternative Minimum Tax (CAMT), which could force the company to liquidate some of its Bitcoin holdings or issue additional debt or equity securities to meet its tax obligations. This means that Bitcoin could be sold to pay taxes, even if the company did not initially plan to sell.

Another risk involves the storage of the Bitcoin reserve. Strategy uses custodians to manage and protect its Bitcoin holdings. If any of these custodians go bankrupt, Strategy could lose its Bitcoin and be classified as a "general unsecured creditor," potentially preventing the company from recovering its assets.

Additionally, Strategy's software business may not generate enough cash to cover its debts or dividends to investors. The company currently owes $8.2 billion in convertible debt and has $3.4 billion in preferred stock, with annual payments exceeding $350 million for interest and dividends. If Strategy cannot raise new funds through selling shares or obtaining loans, it may be forced to sell from its Bitcoin holdings, even during market instability or price crashes.

The structure of Strategy's stocks also adds to its financial stress. According to research, STRK shares pay 8% and can be paid in stock or cash, while STRF pays 10% in cash with growing amounts if unpaid, and STRD pays 10% with regular payments. Missing any of these payments could result in penalties or loss of board control.

Strategy is also exposed to broader economic changes, including fluctuations in Bitcoin prices, interest rate cuts, regulatory changes, and liquidity conditions. Any of these factors could impact the company's Bitcoin investment strategy. Despite these risks, Strategy's investment in Bitcoin remains a significant achievement, owning 3% of the total supply. However, it is important to note that this investment is not risk-free, and the company has acknowledged these risks in its filings.