For years, Michael Saylor has been the most vocal corporate evangelist for Bitcoin, transforming his once-obscure enterprise software company into what he proudly calls a “Bitcoin treasury company.” But as the cryptocurrency market endures another punishing downturn, the sheer scale of Strategy’s leveraged bet on digital gold is producing eye-watering unrealized losses — and raising urgent questions about whether the company’s high-wire financial engineering can survive a prolonged crypto winter.

Strategy, formerly known as MicroStrategy, has accumulated more Bitcoin than any other publicly traded company in the world. The firm’s aggressive acquisition strategy, funded through a complex web of convertible notes, preferred stock offerings, and at-the-market equity sales, was designed to give shareholders leveraged exposure to Bitcoin’s upside. But leverage, as Wall Street veterans know, cuts both ways. With Bitcoin trading well below the average purchase price of significant portions of Strategy’s holdings, the company now faces paper losses that have sent its stock tumbling and rattled even some of its most ardent supporters.

A Treasury Strategy Built on Conviction — and Debt

According to Business Insider, Strategy’s stock has suffered significant declines as Bitcoin’s price has retreated from its highs. The publication reported that the company’s aggressive accumulation strategy — which has seen it purchase Bitcoin at various price levels throughout 2024 and into 2025 — has left it exposed to substantial unrealized losses as the cryptocurrency’s price has fallen. The company’s shares, which trade under the ticker MSTR, have historically exhibited amplified volatility relative to Bitcoin itself, meaning that when Bitcoin drops 10%, MSTR can fall by 20% or more.

Michael Saylor has remained characteristically defiant in the face of these losses. On social media and in public appearances, he has repeatedly argued that Bitcoin is the superior long-term store of value and that short-term price fluctuations are irrelevant to his thesis. His conviction is not new — Saylor first began purchasing Bitcoin for Strategy’s balance sheet in August 2020, when the cryptocurrency was trading around $11,000. Since then, the company has amassed a treasury of over 550,000 Bitcoin, making it by far the largest corporate holder in the world.

The Mechanics of a Leveraged Bitcoin Play

What makes Strategy’s position uniquely precarious — or uniquely bold, depending on one’s perspective — is the manner in which these purchases have been financed. Rather than simply using operating cash flow, Saylor has tapped capital markets repeatedly and aggressively. The company has issued billions of dollars in convertible senior notes, which are debt instruments that can be converted into equity under certain conditions. It has also conducted massive at-the-market equity offerings, diluting existing shareholders to raise cash for more Bitcoin purchases. More recently, Strategy introduced preferred stock offerings, including instruments like its “Strike” and “Strife” preferred shares, which carry fixed dividend obligations.

This layered capital structure means that Strategy is not simply holding Bitcoin on its balance sheet — it is holding Bitcoin purchased with borrowed money and money raised by selling new shares to investors. The fixed obligations associated with the convertible notes and preferred stock do not diminish when Bitcoin’s price falls. Interest payments must still be made. Preferred dividends must still be paid. And if Bitcoin’s price were to fall far enough, the company could theoretically face a liquidity crisis, forced to sell Bitcoin at depressed prices to meet its obligations — a scenario that would be catastrophic for shareholders and could send shockwaves through the broader crypto market.

Unrealized Losses Pile Up Under New Accounting Rules

Adding to the complexity is a change in accounting standards that now requires companies holding digital assets to mark them to market. Under the previous rules, companies could only write down the value of their Bitcoin holdings when prices fell but could not mark them up when prices rose — a one-sided accounting treatment that Saylor himself lobbied against. The new rules, implemented by the Financial Accounting Standards Board (FASB), are more symmetrical, allowing both gains and losses to flow through the income statement. But in a downturn, this means Strategy’s financial statements now reflect the full magnitude of its unrealized losses, making the red ink impossible to ignore.

Business Insider reported that the scale of these paper losses has been substantial, with billions of dollars in unrealized declines weighing on the company’s reported financial results. While Saylor has argued that unrealized losses are meaningless for a long-term holder — comparing Bitcoin’s volatility to the early days of Amazon or other transformative technologies — the market has not been so sanguine. MSTR shares have fallen sharply, underperforming even Bitcoin itself during the downturn, as investors price in the additional risk associated with the company’s leverage and fixed obligations.

The Bull Case: Diamond Hands at Corporate Scale

Saylor’s defenders argue that the current downturn is simply another chapter in Bitcoin’s famously volatile history. They point out that Bitcoin has experienced multiple drawdowns of 50% or more in its lifetime and has always recovered to reach new all-time highs. If that pattern holds, Strategy’s massive Bitcoin treasury could eventually be worth multiples of its current value, making today’s paper losses look trivial in retrospect. The company’s long-dated convertible notes, many of which do not mature for several years, give it time to weather the storm without being forced to sell.

Moreover, Saylor has structured some of the company’s debt instruments with conversion prices well above current levels, meaning that if Bitcoin recovers and MSTR’s stock price rises accordingly, those notes could be converted into equity rather than repaid in cash — effectively eliminating the debt without any cash outlay. This is a clever piece of financial engineering that could work brilliantly in a bull market. The question is whether the company can survive long enough to see that bull market materialize.

The Bear Case: Leverage in a Liquidity Crunch

Critics, however, see Strategy as a ticking time bomb. The company’s core software business generates relatively modest revenue and cash flow — nowhere near enough to service the billions of dollars in debt and preferred stock obligations that Saylor has layered onto the balance sheet. If Bitcoin’s price remains depressed for an extended period, or falls further, the company could find itself unable to meet its fixed obligations without selling Bitcoin at a loss or raising additional capital on increasingly unfavorable terms.

There is also the systemic risk to consider. Strategy holds such a large quantity of Bitcoin that any forced liquidation could itself depress the market, creating a vicious feedback loop. Other leveraged Bitcoin holders — including miners, funds, and retail traders using margin — could be caught in the same downdraft, amplifying the selling pressure. This is the nightmare scenario that Bitcoin bears have warned about for years: a cascading liquidation event triggered by overleveraged corporate holders.

Saylor’s Unshakable Faith Meets Market Reality

Michael Saylor has shown no signs of wavering. In posts on X and in media appearances, he has continued to advocate for Bitcoin with the fervor of a true believer. He has frequently cited Bitcoin’s fixed supply of 21 million coins, its decentralized nature, and its potential to serve as a global reserve asset as reasons why its long-term trajectory is inexorably upward. He has also pointed to growing institutional adoption, including the approval of spot Bitcoin ETFs in the United States, as validation of his thesis.

But faith and financial reality do not always align. The approval of spot Bitcoin ETFs, while a milestone for the industry, has also created new competition for Strategy. Investors who once bought MSTR as a proxy for Bitcoin exposure can now purchase Bitcoin directly through low-cost ETFs without taking on the additional risks associated with Strategy’s leverage and corporate structure. This has arguably diminished one of MSTR’s key value propositions, and some analysts believe it helps explain why the stock has underperformed Bitcoin during the recent selloff.

What Comes Next for the World’s Biggest Corporate Bitcoin Holder

The coming months will be critical for Strategy and its shareholders. If Bitcoin recovers — as it has after every previous major drawdown — Saylor will be vindicated once again, and MSTR could deliver outsized returns to those who held through the pain. The company’s massive Bitcoin treasury, acquired at a blended average cost that remains below Bitcoin’s all-time highs, would become an enormously valuable asset.

But if the downturn deepens or persists, the pressure on Strategy’s balance sheet will intensify. The company’s ability to continue servicing its debt and preferred stock obligations without selling Bitcoin will be tested. And the market’s willingness to extend additional capital to a company that has already raised billions — and whose core thesis is being challenged by falling prices — cannot be taken for granted. As Business Insider has documented, the risks embedded in Strategy’s approach are real, and they grow larger with every leg down in Bitcoin’s price.

Michael Saylor has staked his reputation, his company, and billions of dollars of investor capital on the belief that Bitcoin will ultimately triumph as the world’s preeminent store of value. It is, by any measure, one of the most audacious corporate bets in modern financial history. Whether it proves to be a stroke of genius or a cautionary tale will depend on a single variable that no one — not even Saylor — can control: the price of Bitcoin.