Why MicroStrategy's Downfall Could Trigger a Major Crisis for Crypto in 2026

MicroStrategy, now known as Strategy, stands as the largest corporate Bitcoin holder, controlling 671,268 BTC, which amounts to over 3.2% of all Bitcoin in circulation. This positions the company as a high-risk component within the Bitcoin ecosystem.

Key Takeaways

MicroStrategy is the largest corporate holder of Bitcoin, holding over 671,268 BTC.
The company is heavily tied to Bitcoin's performance, having invested over $50 billion primarily using debt.
Concerns about its financial sustainability and significant debt obligations raise the risk of insolvency.
A potential collapse could lead to extensive market disruption, impacting Bitcoin prices and investor confidence.
While the likelihood of a total collapse in 2026 is low, it is still a significant risk that could have far-reaching consequences for the entire cryptocurrency market.

If the company encounters serious issues, the repercussions could surpass those of the 2022 FTX collapse. In this article, we explore the reality of this threat, potential triggers for such a scenario, and the extent of possible fallout.

Understanding MicroStrategy's Bitcoin Investment Strategy

MicroStrategy has essentially tied its entire identity and financial future to Bitcoin. The firm has invested more than $50 billion in Bitcoin, primarily through debt financing and the sale of stocks. Its software-related revenue amounts to just $460 million annually, a minuscule fraction of its total exposure to Bitcoin.

As December 2025 approaches, the company's stock is underperforming compared to the value of its Bitcoin holdings. It has a market valuation of about $45 billion, while its Bitcoin assets are estimated to be worth between $59 and $60 billion.

MicroStrategy’s Share Prices Over the Second Half of 2025. Source: Google Finance

Investors are skeptical about MicroStrategy's assets due to concerns over dilution, debt, and the sustainability of its strategy. The company's average cost basis for Bitcoin purchases stands at approximately $74,972, with most recent acquisitions occurring near the peak price of Bitcoin in Q4 2025. Notably, more than 95% of its market value is closely tied to Bitcoin's price.

If Bitcoin experiences a significant drop, MicroStrategy could find itself in a precarious situation, laden with billions in debt and preferred equity with few options for recovery. For instance, since October 10, Bitcoin decreased by 20%, while MicroStrategy's stock, MSTR, has seen losses that are over double that percentage.

MSTR Stock Performance Comparison with NASDAQ-100 and S&P 500 in 2025. Source: Saylor Tracker

Identifying the Black Swan Risk

MicroStrategy has employed aggressive financial tactics to fund its Bitcoin investments, including selling common stock and issuing new preferred shares. The company currently has over $8.2 billion in convertible debt and more than $7.5 billion in preferred stock obligations, which necessitate substantial annual cash payments of $779 million in interest and dividends.

Should Bitcoin plummet to below $13,000, MicroStrategy’s chances of insolvency would escalate significantly. While this scenario may not be imminent, Bitcoin’s historical performance suggests that severe downturns of 70–80% are not unusual. A major market crash, particularly if combined with a liquidity crisis or volatility sparked by ETF activity, could push the firm into serious financial distress.

Strategy’s Total Debt as of Q3 2025. Source: Companies Market Cap

Unlike FTX, MicroStrategy is not an exchange, but its downfall could have deeper implications. The company possesses more Bitcoin than all but a select few ETFs and government holdings. Any forced liquidation or market panic surrounding MicroStrategy's potential failure could lead to a sharp decline in Bitcoin prices, resulting in a cascading effect throughout the entire cryptocurrency market.

MicroStrategy has pledged not to sell its Bitcoin holdings; however, this is contingent on its ability to secure cash. By late 2025, the company has approximately $2.2 billion in reserves, sufficient to cover two years of payouts. Yet this cushion could dissipate rapidly if Bitcoin prices decline and capital markets tighten.

Assessing the Likelihood of MicroStrategy's Collapse

While assessing the probability of a collapse isn't straightforward, the risk is clearly increasing. MicroStrategy's current standing is precarious, with its stock having fallen by 50% this year. Its market-adjusted net asset value (mNAV) is now below 0.8×, and institutional investors are increasingly gravitating toward Bitcoin ETFs, which offer a more affordable and less complicated investment option.

Additionally, index funds may remove MSTR from their portfolios due to its structure, resulting in billions of passive investment outflows.

MicroStrategy mNAV. Source: Saylor Tracker

If Bitcoin were to drop below $50,000 and remain there, MicroStrategy's market capitalization could fall below its total debt, cutting off its access to capital and forcing it into tough financial decisions such as selling assets or restructuring.

Although the chance of a total collapse in 2026 remains low, it is not out of the question. Current estimates suggest a probability range of 10–20%, given the existing balance sheet challenges, market behaviors, and Bitcoin's inherent volatility.

However, should a collapse occur, the impact might exceed that of the FTX disaster. Unlike FTX, which was a centralized exchange, MicroStrategy is a vital stakeholder in Bitcoin’s supply. If it were to liquidate its holdings, Bitcoin's price and overall market confidence could take a significant hit, potentially leading to a widespread selloff throughout the cryptocurrency landscape.