Has Leverage Caught Up with Strategy? A 66% Fall Amid Bitcoin's Resilience

As Bitcoin showed slight signs of weakness, leverage and premium trades unraveled, leading to a significant disconnect between Strategy (formerly MicroStrategy) and Bitcoin's performance.

Key Takeaways

Strategy's ($MSTR) stock has plunged about 66% in the last six months, losing nearly $90 billion in market cap by December 26, 2025.
Despite Bitcoin's relative strength, there has been a stark discrepancy between its value and that of Strategy, which is primarily a Bitcoin proxy.
The collapse of Strategy's NAV premium, coupled with concerns over leverage and balance-sheet complexity, has caused investors to reassess their investments.
As leverage turns against shareholders, market perception shifts from growth to capital preservation.

Strategy’s 66% fall v. Bitcoin’s strength – Is leverage finally catching up to $MSTR?

Understanding the Market's Shift

The Reassessment of Leveraged Bitcoin Exposure

In recent times, investors have begun to view Strategy not just as an indirect investment in Bitcoin, but as a more complicated financial structure involving leverage. Strategy holds around $60 billion worth of Bitcoin (BTC), yet its equity is trading at a 20-25% discount compared to this underlying value. This situation indicates a significant change in how investors are valuing risk and leverage.

Once the NAV premium collapsed, the downside exposure became increasingly apparent. Leverage, which had previously amplified profits, began exacerbating losses, leading to cautious sentiment among investors particularly in turbulent market conditions.

The Collapse of NAV Premium Signals Market Change

The rapid unwinding of premium-driven trades often occurs when market confidence wanes. Historically, Strategy’s shares traded above the actual value of its Bitcoin holdings, reflecting a perceived strategic advantage. However, by late December, this premium not only disappeared but flipped, indicating a deeper structural revaluation rather than just short-term fluctuations.

Ongoing dilution from share issuance further raised worries about the long-term viability of the company's equity, as investors grew more concerned about the risks associated with its balance sheet.

Leverage Works Against Shareholders

Once market conditions shifted unfavorably for premium-based strategies, leverage began to hinder returns instead of enhancing them. Increased volatility magnified the downside, leading investors to either seek higher yields or exit their positions altogether.

Investors typically prefer simpler structures during times of stress, and Strategy’s complex arrangement has increasingly diverged from these preferences.

STRC: A Defensive Move Amid Financial Pressures

With pressure mounting on its equity, Strategy shifted its messaging from growth to income. Michael Saylor introduced STRC, a cash-dividend option providing an 11% annual return, disbursed monthly. While marketed as a means for generating income, this move mostly came across as defensive rather than indicative of future growth.

Higher yield signaled capital preservation, rather than confidence.

The focus on higher yields indicated a desire for capital preservation in response to market pressures, suggesting that management is reacting rather than leading with growth ambitions.

The Core Issue: Asset Versus Corporate Structure

The disparity between Bitcoin ownership and corporate exposure has become increasingly apparent. While Bitcoin itself has not suffered a comparable decline, Strategy has taken an extensive hit. This divide highlights the growing distinction investors are making between the cryptocurrency and the corporate entities holding them.

Conclusion

The current landscape reveals a precarious situation for Strategy as it grapples with leverage complications and a shifting investor perspective. Understanding this divergence is crucial as it emphasizes the differences between owning Bitcoin directly versus through a leveraged corporate structure.