The Structural Risks of Corporate Bitcoin Ownership and Market Implications

The rise of digital asset treasury (DAT) companies-corporations that treat Bitcoin as a primary reserve asset-has introduced a new layer of complexity to institutional investing. Strategy Inc. (MSTR), led by Michael Saylor, epitomizes this trend, with Bitcoin holdings of $48.37 billion as of November 2025. However, its business model-a feedback loop of equity issuance, Bitcoin accumulation, and price-driven capital raising-has exposed profound structural vulnerabilities. These risks, compounded by pending index delisting threats and cascading market effects, underscore the fragility of corporate Bitcoin ownership and its potential to destabilize broader financial markets.

The Ponzi-Like Financing Model

Strategy's core strategy hinges on a self-reinforcing cycle: issuing shares to raise capital, using proceeds to buy Bitcoin, and leveraging Bitcoin's price appreciation to justify further capital inflows. At its peak, the company's market capitalization exceeded the value of its Bitcoin reserves by a factor of 1.5, creating a speculative premium that masked underlying liquidity risks. However, this premium has eroded, with the mNAV (market net asset value) ratio now hovering at just 1.1. This metric, which compares enterprise value to Bitcoin holdings, has historically signaled market sentiment. A declining mNAV weakens capital-raising capabilities, forcing further equity issuance and shareholder dilution-a dynamic that exacerbates downward pressure on the stock price.

The company's reliance on high-yield preferred shares and convertible debt has also amplified fragility. For instance, a $1.2 billion 10% preferred share issuance in June 2025 traded at 85 cents at the time but plummeted to 66 cents by November, pushing yields to 15%. This increased cost of capital threatens to undermine Strategy's ability to fund operations and dividend payments, particularly as Bitcoin's price volatility persists.

Index Delisting Risks and Liquidity Exposure

Strategy's inclusion in major indices like the Nasdaq 100 and MSCI USA has historically driven $9 billion in passive fund flows. However, MSCI's proposed rule to exclude companies with digital assets accounting for 50% or more of total assets could trigger up to $2.8 billion in outflows if implemented. Such a delisting would not only strip the firm of critical liquidity but also erode institutional legitimacy, as index inclusion has long served as a proxy for corporate credibility.

The cascading effects of delisting are compounded by the company's narrow business model. Unlike traditional corporations, Strategy generates no revenue from operations; its entire value proposition depends on Bitcoin's price trajectory. This concentration leaves it uniquely exposed to market downturns. For example, Bitcoin's recent selloff-falling from $126,270 to $93,000-directly impacted Strategy's financing story, with its stock price declining 60% year-to-date.

Broader Market Implications

Strategy's struggles highlight systemic risks inherent to the DAT model. If corporate Bitcoin ownership becomes a widespread strategy, market stability could hinge on the continued performance of a single asset. This concentration creates a feedback loop: falling Bitcoin prices weaken DAT companies' balance sheets, triggering forced asset sales that further depress prices. Such dynamics were evident in Strategy's recent $835.6 million Bitcoin purchase at $102,171 per coin-a move that, while signaling long-term conviction, also underscores the company's reliance on Bitcoin's recovery to justify its valuation.

Moreover, the DAT model's lack of diversification and hedging mechanisms leaves it vulnerable to macroeconomic shocks. Unlike traditional investment funds, which employ yield-generating strategies or risk mitigation tools, DAT companies like Strategy have no alternative revenue streams. This lack of resilience raises questions about their role in institutional portfolios, particularly as regulators scrutinize the alignment of DATs with fiduciary standards.

Toward a More Resilient Framework

The lessons from Strategy's trajectory point to three critical imperatives for institutional investors and regulators:
1. Liquidity Management: DATs must diversify capital-raising strategies beyond equity issuance to avoid overreliance on volatile markets.
2. Diversification: Holding Bitcoin as a primary reserve asset requires complementary strategies-such as yield generation or hedging-to buffer against price swings.
3. Regulatory Alignment: Index providers and regulators should clarify the classification of DATs to ensure transparency and mitigate systemic risks.

While Michael Saylor and analysts like Willy Woo argue that liquidation is unlikely, the broader market's confidence in the DAT model remains fragile. As Bitcoin's price stabilizes or fluctuates further, the structural risks embedded in corporate Bitcoin ownership will continue to test the boundaries of institutional investing.