"If Bitcoin Crashes, It's Over"...Strategy Warns of $8.2 Billion Debt 'Time Bomb'

▲ Bitcoin (BTC), Strategy (MSTR)/ChatGPT generated image

A warning has been issued that if the price of Bitcoin (BTC) turns downwards, Strategy's high-risk leveraged structure could send shockwaves throughout the entire virtual asset market.

According to a video released on April 21 (local time) by Coin Bureau, a cryptocurrency-focused YouTube channel, Strategy is recording annual operating losses ranging from $80 million to $120 million in its core software business. The company's key driver is its At-The-Market (ATM) stock issuance program, designed for accumulating Bitcoin (BTC). This structure continuously purchases Bitcoin with funds secured by issuing new shares, and it only functions normally if the stock price maintains a premium over its Net Asset Value (NAV).

The problem lies in its financial structure. Strategy holds approximately $8.28 billion in convertible bonds and a multi-layered preferred stock debt. The annual interest and dividend burden alone amounts to about $1.12 billion, a level difficult to cover with its core business revenue. Moreover, approximately one-third of its held Bitcoin is effectively attributed to senior creditors, leading to analysis that the value for common shareholders could be severely damaged if the price drops by about 33%.

The preferred stock product 'STRC', which boasts high dividends, is also pointed out as a risk factor. Chairman Michael Saylor introduced it as a stable investment product, but in reality, its structure is closer to unsecured perpetual preferred stock. Dividends also rely on new capital inflows rather than Bitcoin profits, raising questions about sustainability. The company's Altman Z-score, which indicates financial health, is 1.98, nearing the financial distress zone.

Changes in accounting standards are also a burden. With new accounting standards applied from January 2025, Bitcoin price fluctuations are directly reflected in quarterly profit and loss, significantly increasing performance volatility. In fact, a revaluation loss of $14.46 billion occurred in Q1 2026 alone, dampening investment sentiment. There is also a possibility that a 'vicious cycle' could form, where the ATM program effectively becomes paralyzed and fundraising ceases if the stock price falls.

Strategy holds approximately 78,897 BTC, which is about 3.9% of the total circulating supply. If some of this volume is sold on the market due to financial pressure, a significant shock to the entire virtual asset market is inevitable. In particular, the scheduled redemption of convertible bonds in September 2027 is considered a key variable determining the sustainability of this structure.

Ultimately, Strategy's strategy is maintained on the premise of a continuous rise in Bitcoin prices. Analysis suggests that whether this high-risk bet will be lauded as financial innovation or act as a market-shaking risk depends on future price movements.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*