Strategy Maintains Strong Balance Sheet Despite Potential Bitcoin Crash

Strategy, the company formerly known as MicroStrategy, assures that its assets-to-debt collateral ratio will stay at 2.0x, even if Bitcoin (BTC) were to plunge to $25,000, significantly lower than its $74,000 average purchase price.

Key Takeaways

Strategy asserts that its assets-to-debt ratio will remain strong at 2.0x, even if Bitcoin drops to $25,000.
The company presently has $8.214 billion in convertible debt, supported by a high BTC Rating.
Strategy currently holds 649,870 BTC valued at $56.99 billion, making it the largest corporate Bitcoin holder.
The company faces scrutiny from MSCI regarding potential exclusion from indices due to its digital asset holdings.
Ongoing asset transfers to diversify custodial risks highlight Strategy's commitment to financial stability and resilience.

The company’s stock has decreased by 49% and could face exclusion from MSCI indices, with a decision expected by January 2026.

MicroStrategy’s Impressive $16 Billion Debt Backed by Bitcoin

In a recent post on X (formerly Twitter), the company showcased the strength of its balance sheet by discussing its "BTC Rating" for convertible debt.

“If BTC drops to our $74,000 average price, our assets would still be 5.9 times greater than our convertible debt, which is what we refer to as the BTC Rating of our debt. Should Bitcoin fall to $25,000, our ratio will remain at 2.0x,” the post stated.

The firm asserts that even if Bitcoin fell to its average cost price of $74,000, the value of its BTC holdings would still exceed its convertible debt by 5.9 times. In a more severe scenario where Bitcoin drops to $25,000, the assets-to-debt ratio would hold steady at 2.0x.

As of now, with Bitcoin priced at $87,812, the company displays a robust asset-to-liability profile. Strategy has an outstanding $8.214 billion in convertible debt with maturities stretching from 2028 to 2032. Most of these convertible notes exhibit remarkably high BTC Ratings, ranging from 7x to over 50x, while the overall BTC Rating for convertible debt stands at 6.9x.

Strategy BTC Rating. Source: Strategy Credit Dashboard

Beneath this debt, the company holds $7.779 billion in preferred stock across five series (STRF, STRC, STRE, STRK, STRD). These stocks have longer average durations, typically extending 8 to 10 years or more, and carry slightly elevated risks compared to the senior debt stack.

The preferred equity has a BTC Rating of 3.6x, indicating a strong but thinner collateral cushion compared to the company’s convertible debt. In total, the company's obligations, including debt and preferred stock, amount to $15.993 billion.

At the current Bitcoin price, these liabilities benefit from a consolidated BTC Rating of 3.6x, meaning the company has over three and a half times the value of its outstanding obligations in Bitcoin-denominated assets.

This situation illustrates that the company is exceptionally well-capitalized, significantly overcollateralized by a substantial Bitcoin reserve, making it resilient against declines in Bitcoin prices. This provides the firm with important financial stability and strategic flexibility.

According to SaylorTracker, Strategy holds 649,870 BTC, valued at $56.99 billion, making it the largest corporate holder of Bitcoin globally.

Navigating Market Challenges and Index Risks

This information emerges as the company faces notable pressures. MSTR shares have dropped more than 49% since early October, reaching levels not seen since late 2024.

MicroStrategy (MSTR) Stock Performance. Source: TradingView

Additionally, Strategy encounters increased scrutiny from MSCI, which is considering criteria that may exclude companies where digital assets comprise 50% or more of total assets. A decision on this matter is expected by January 15, 2026. JPMorgan’s research suggests that potential outflows could reach as high as $8.8 billion if other index providers adopt similar regulations. The bank stated,

“With MSCI now contemplating removing MicroStrategy and similar digital asset treasury firms from its equity indices, potential outflows could total $2.8 billion if MicroStrategy is excluded from MSCI indices and $8.8 billion if other equity indices follow suit.”

Furthermore, the company missed an opportunity to be included in the S&P 500. Compounding these challenges, after six consecutive weeks of Bitcoin purchases, the firm has halted its buying trend as the mNAV premium has shrunk closer to parity.

Despite these obstacles, the firm is making strategic adjustments. Blockchain intelligence firm Arkham reported that Strategy has started transferring some assets from Coinbase to Fidelity Custody, suggesting a plan to distribute custodial risks among several regulated providers.

“Strategy (MSTR) is diversifying its custodians away from Coinbase, having moved 58,390 BTC (currently valued at $5.1 billion) to Fidelity Custody over the past two months, totaling 165,709 BTC ($14.50 billion) moved to Fidelity,” stated Arkham.

In conclusion, even amid increasing market pressure, uncertainty surrounding indices, and a significant decline in its stock price, Strategy remains heavily overcollateralized and structurally resilient. Its Bitcoin-backed balance sheet continues to serve as a robust buffer against volatility. Moreover, ongoing efforts to diversify custodial risks indicate the company's commitment to long-term stability, even in a tough market environment.