In this post, we will dive into Strategy’s (MSTR) Bitcoin bet and its recent struggles. But first, our disclosure:
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Strategy (MSTR), Bitcoin, And World Domination
If you live in the Bitcoin echo chamber, then the company Strategy (formerly MicroStrategy) is already a household name. You might even believe it will take over the world, gobbling up the giants of Nvidia and Alphabet (Google) along the way.
On the flip side, if you’re not familiar with Strategy (MSTR) and its Bitcoin treasury, you might wonder how an obscure company can achieve world domination using magic internet money. If you fall in this camp, you are not alone. Don’t worry. We will get into the details soon enough.
For now, the key thing to understand is that Bitcoin is the OG of cryptocurrencies and is one of the most volatile assets anyone can own. Strategy (MSTR) is the OG of Bitcoin treasury companies and tries to amplify Bitcoin’s volatility to increase returns. It is a leveraged play on Bitcoin.
Many investors are drawn to MSTR for its volatility and the potential for outsized returns. But with great volatility comes great risk, and investing in MSTR is about as risky as it gets.
When Bitcoin’s price rises, as in 2024, MSTR is among the best-performing stocks, gaining over 350% that year. But when Bitcoin’s price drops, as in 2025, the results are bad: MSTR is down 45% on the year, while the S&P 500 is up over 15%.
A drop of that size in Strategy’s stock price in an up year for the S&P 500 has many investors questioning Strategy’s Bitcoin strategy (pun intended).
In this post, we’ll take a detailed look at Strategy (MSTR) and see whether its Bitcoin bet is in jeopardy.
Let’s start with a brief history of Strategy.
Who is Strategy (MSTR) and Michael Saylor?
Strategy (MSTR) was originally founded in 1989 as MicroStrategy, a business intelligence software company. One of its founders includes the current chairman and former CEO, Michael Saylor. Michael Saylor is a controversial figure with a somewhat checkered past.
In 2000, Saylor, along with other MicroStrategy executives, was charged by the government with accounting fraud. He ultimately agreed to pay a fine without admitting guilt. More recently, Saylor and MicroStrategy faced tax evasion charges in Washington, D.C. Once again, he settled the charges ($40 million fine) without admitting guilt.
Unfortunately for Strategy (MSTR), its struggling software business hasn’t fared much better. As Michael Saylor tells it, he tried everything to grow the business, but nothing worked. Then, during the peak of the COVID-19 pandemic, he found his answer: Bitcoin.
According to Michael Saylor, the light bulb went off after he read The Bitcoin Standard by Saifedean Ammous. After reading Ammous’ book, he decided to go all-in on Bitcoin and transform his software company into a Bitcoin treasury.
However, due to his controversial past, many question Saylor’s conversion from Bitcoin skeptic to Bitcoin bull. Of course, supporters of Strategy (MSTR) view Saylor as a Bitcoin prophet, while his critics label him a Bitcoin snake oil salesman.
Regardless of what people think of him, Michael Saylor has been full speed ahead in his mission to transform Strategy into a Bitcoin Treasury company. To reflect its new mission, Saylor renamed MicroStrategy in 2025, rebranding the company as Strategy to mark its shift from software to Bitcoin.
How big was that shift?
Massive!
Just look at its Bitcoin holdings.
How Much Bitcoin Does MSTR Own?
Strategy (MSTR) began its transformation to a Bitcoin treasury by purchasing 21,454 bitcoins in 2020. Fast forward five years, and the company now owns over 650,000 bitcoins and counting. The total value of its Bitcoin holdings is nearly $60 billion at current prices. In comparison, Strategy’s software business generates only around $500 million in annual revenue.
To put these numbers in perspective, holding 650,000 bitcoins means Strategy (MSTR) holds over 3% of all bitcoins that will ever exist. And that number will only increase as Strategy continues to acquire more bitcoin at a breakneck speed.
But how does Strategy (MSTR) acquire billions of dollars in Bitcoin, when its software business generates so little revenue? Where is the money coming from to purchase Bitcoin?
This is the billion-dollar question that we are about to answer.
How Does Strategy (MSTR) Acquire Bitcoin?
A Bitcoin treasury company, like Strategy (MSTR), uses Bitcoin as its reserve asset rather than cash. Its primary goal is stock appreciation through Bitcoin acquisition and appreciation, using a process that Saylor affectionately calls the “Bitcoin perpetual money glitch” or “flywheel.”
Here’s how it works:
- Raise Capital: Issue stock (common and preferred), and convertible notes (debt) to raise capital to purchase Bitcoin.
- Buy Bitcoin: Use the money raised from issuing new stock and convertible notes to buy Bitcoin.
- Raise More Capital: Use the growing value of its Bitcoin holdings to issue more stocks and convertible notes.
- Buy More Bitcoin: Use the money from the latest round of stock and bond offerings to buy more Bitcoin.
- Rinse And Repeat
If everything goes according to plan, the “flywheel” results in a stock price trading at a premium to the value of its Bitcoin holdings. The bigger the premium, the more capital Strategy (MSTR) can raise to buy more Bitcoin. The more Bitcoin it buys, the higher its stock price goes.
Sounds great, right?
What can go wrong?
A lot, actually.
The Main Risks Strategy (MSTR) and Its Bitcoin Bet Faces
I have a pretty good understanding of the risks associated with investing in MSTR. For better or worse, I took a small position in Strategy near its all-time highs and have felt the pain of its stock price getting cut in half in 2025.
Go ahead and laugh at my losses. I can take it, as I knew exactly what I was getting into when I invested in Strategy (MSTR).
Here are a few of the main risks Strategy (MSTR) faces:
Bitcoin’s Price
The “flywheel” works great when Bitcoin’s price is rising, but not so great when it’s falling.
From 2023 to the end of 2024, Bitcoin’s price increased from around $16,000 to over $100,000. As a result, MSTR had monster returns of around 350% in both 2023 and 2024. That’s a combined return of 700% over two years! However, 2025 has been a different story for MSTR.
Strategy (MSTR) has suffered mightily in 2025 as Bitcoin has failed to hold its gains.
Bitcoin hit a new record high of $126,000 in October, but it has been all downhill since then, with Bitcoin ready to close out the year around $90,000. That’s below where it started in 2025. This has spelled bad news for Strategy (MSTR), with its stock down almost 50% on the year. That’s a far cry from the 350% returns of the past couple of years.
The key takeaway is that Strategy (MSTR) is betting on the long-term appreciation of Bitcoin. But there is no guarantee that Bitcoin’s value will continue to increase. There is a very real risk that it doesn’t. If that happens, not only Strategy, but every other Bitcoin treasury company will be at great risk of becoming extinct like the dinosaurs.
Stock Dilution
Strategy (MSR) raises capital to buy Bitcoin by issuing new shares of common stock. It also issues dividend-paying preferred stock and convertible bonds that can be converted into common stock. These methods are quick and effective ways to raise capital, but they result in stock dilution.
Stock dilution occurs when a company issues more shares of its stock. Issuing new stock increases the total number of shares outstanding, but reduces earnings per share and the percentage of the company each existing shareholder owns. Essentially, existing shareholders own a smaller piece of the pie than they did before the new shares were issued. It’s like sharing a pizza.
Let’s say you invite a few friends over to watch a football game. There are 8 of you in total. You order a large pizza with eight slices, so that everyone can have a slice. Just as you’re about to dig in, your teenage son arrives with 7 hungry friends. Now, instead of feeding 8 people, there are 16 of you to feed. Rather than ordering a new pie, you decide to cut each slice in half, creating 16 slices. You and your buddies still each get one slice of pizza, but it is a much smaller slice.
Of course, Strategy (MSTR) is increasing the size of the pizza as it acquires more Bitcoin. But unless it doubles in size (that would be one big pizza!), you are still left with a smaller slice than you started with.
Liquidity and Leverage Risk
Strategy is not making its Bitcoin purchases with free cash flow. It is hard to make billions of dollars in Bitcoin purchases on $500 million in annual revenue. The fact is that once you factor in costs, Strategy makes very little profit from its software business. It would be a completely different story if Strategy (MSTR) were like the software giant Microsoft.
Microsoft generates hundreds of billions of dollars in revenue each year and has over $100 billion in cash reserves. It would be a drop in the bucket if they used some of those billions to buy Bitcoin. But Strategy is not Microsoft.
So, the only way for Strategy (MSTR) to acquire Bitcoin at the scale it has is through stock offerings and debt. To make matters worse, it also needs to secure loans to pay dividends on its preferred stock. Critics argue that this makes Strategy more akin to a multi-level marketing scheme than a legitimate business, as it must continually raise capital from new investors and debt to purchase Bitcoin.
Even if you are a supporter of Strategy and Bitcoin, you must admit that the critics bring up a valid concern.
Since its software business turns so little revenue, there is always the possibility that Strategy (MSTR) could find itself in a position where it needs to sell Bitcoin to cover dividend and debt payments. Selling any amount of Bitcoin would be devastating to the stock and likely cause its stock price to collapse.
Of course, Michael Saylor says they will never sell their Bitcoin. However, a prolonged economic or Bitcoin downturn could change that mantra. Down markets tighten liquidity, making it more difficult to raise the funds needed to cover dividend and debt payments.
Why Strategy’s Bitcoin Bet Might Still Work Out?
At this point, you might be wondering why the heck anyone would invest in Strategy (MSTR). It is super risky, and its entire success depends on magic internet money that you cannot touch or feel.
Despite the risks, the long-term case for Strategy’s Bitcoin bet is solid and includes:
Scarcity and Bitcoin Halving
There will only ever be 21 million bitcoins, making it one of the scarcest assets anyone can own. To further drive scarcity, Bitcoin was designed with a halving cycle.
When a new block is mined, the winning miner receives a block reward in Bitcoin (plus transaction fees). Bitcoin is programmed to reduce the reward every 210,000 blocks, about every four years.
The Bitcoin block reward started at 50 bitcoins, and now stands at 3.125 bitcoins. That number will be cut in half again in 2028 to 1.5625 bitcoins. The Bitcoin block reward will continue to be halved roughly every 4 years until about 2140, at which point there will be no more Bitcoins to mine.
Adding to this, every Bitcoin Strategy (MSTR) buys is one less Bitcoin that someone else can own. Over time, this scarcity should drive up Bitcoin’s price and the value of Strategy’s Bitcoin holdings, so long as its use as a store of value continues to grow.
Institutional Adoption
Scarcity matters only if an increasing number of people and institutions view Bitcoin as a legitimate store of value and are willing to pay a higher price to acquire it. Fortunately for Bitcoin, that seems to be the case, though sentiment can always change.
Once considered an outcast by big banks and investment firms, Bitcoin is now seeing institutional adoption at an unprecedented pace, largely thanks to the launch of spot Bitcoin ETFs.
Spot Bitcoin ETFs brought Bitcoin to Main Street, making it easier to invest in Bitcoin without the need to understand crypto wallets and seed phrases. They were a huge success, seeing massive inflows from investors. In case there is any confusion: inflows equal money and money equals profits.
Nothing changes an institution’s mind about an asset like money, and spot Bitcoin ETFs make a lot of money for their firms. They are among the most successful ETFs ever launched. forcing even Bitcoin’s biggest critics, like JPMorgan Chase and Vanguard, to capitulate.
Strategy (MSTR) Has A Wide Moat and Time
With 650,000 bitcoins and counting, Strategy (MSTR) isn’t just winning the Bitcoin arms race; it’s lapping the competition. No other public company comes close to its Bitcoin holdings. The second-place company, Marathon Digital Holdings (MARA), is far behind, with just over 50,000 bitcoins on its balance sheet.
Strategy is so far ahead that, if you combined the Bitcoin holdings of the next 99 public Bitcoin Treasury companies, they would still collectively have fewer bitcoins than Strategy. The chances of anyone catching up at this point are slim to none. The only companies that might have a chance are the Mag-7, but they show little interest. In fact, the only Mag-7 company in the top 100 public Bitcoin treasury companies is Tesla, which has just over 11,000 bitcoins, ranking it outside the top 10.
With such a lead over its competition, Strategy (MSTR) can play the long game. With its large Bitcoin stockpile and strategically issued preferred shares and convertible notes, Strategy has positioned itself to weather Bitcoin’s short-term volatility. Its Bitcoin bet works so long as Bitcoin continues to go up and to the right over the long haul. There is no guarantee that Bitcoin will continue to appreciate, but increasing adoption by investors and institutions gives it a fighting chance.
That is the chance I am betting on with Strategy (MSTR), which is why I am still holding it despite losing 50% in 2025. It’s a small bet, one that I can afford to lose, but a bet nonetheless. This is not financial advice!
Conclusion: Is Strategy’s Bitcoin Bet in Jeopardy?
In my opinion, Strategy’s Bitcoin bet is not in Jeopardy right now. That is not to say this will always be the case. Anything can happen, but Strategy has survived worse Bitcoin drawdowns than the one we saw in 2025. However, that does not make it any less risky an investment.
Investing in Strategy (MSTR) is about as risky as it gets. Being a leveraged play on internet money means wild price swings. It is not unusual to see price swings of 10% or more in a day or losses of over 70% in a given year. There is always a possibility that Bitcoin crashes and never recovers, dragging down Strategy (MSTR) with it.
Therefore, never forget that investing involves risks, and you can lose all of your money. So, do your research before investing in any asset, whether MSTR or another company or asset, and consult a professional if needed.
