Microstrategy in Trouble as BTC Falls

MicroStrategy or I guess just “Strategy” (MSTR) is deeply exposed to the current fall in Bitcoin and I wanted to explore why and also just how much trouble they’re in:

1. MSTR Stock Acts as a Leveraged Bitcoin Proxy

• The Business Model: MicroStrategy has fundamentally transformed itself from enterprise software company into a "Bitcoin development company" and a massive BTC holder. Its strategy is to continually acquire and hold Bitcoin. Thats it. Thats the business plan…. Yikes.

• Stock Correlation: Because of this strategy, MicroStrategy's stock price is pretty much directly correlated and often more volatile than Bitcoin itself. Investors treat MSTR shares as a way to gain leveraged exposure to Bitcoin. When BTC falls sharply, MSTR shares typically fall even harder due to this amplified volatility. 

• Average Cost: As of a recent disclosure (November 2025), MicroStrategy holds a massive amount of Bitcoin, acquired for an average price of around $74,079 per Bitcoin (though this figure is constantly updated as they buy more). If the current market price of BTC drops significantly below this average cost, MicroStrategy incurs substantial paper losses on its holdings, which directly impacts its stock price. 

2. Risk from High Debt Levels (Leverage)

• Funding Strategy: MicroStrategy has largely financed its massive Bitcoin purchases by issuing billions of dollars in convertible senior notes (debt) and perpetual preferred stocks. 

• The Leverage: This use of debt (leverage) to buy a speculative asset (Bitcoin) is what magnifies the risk. While the debt often comes with a low or zero-interest coupon, the principal must eventually be repaid or converted. 

• Bondholder Risk: In a major, sustained market collapse, there's a theoretical, long-term risk to bondholders if the value of MicroStrategy's primary asset (Bitcoin) drops so low that the company cannot service its debt obligations, or if bondholders opt to demand cash at certain redemption dates.

3. Potential Margin Call Scenarios (A Historical Concern)

• Collateralized Loan: In the past, MicroStrategy took out a specific, smaller loan ($205 million from Silvergate Bank, now defunct) that was collateralized by a portion of its Bitcoin holdings. 

• The Threshold: They disclosed in 2022 that a margin call on that specific loan would be triggered if Bitcoin dropped to about $21,000. 

• The Mitigation: While the company stated at the time that they had ample unencumbered Bitcoin (BTC not used as collateral) to add to the collateral package to avoid liquidation, the threat of a margin call—or the need to sell some BTC to cover a debt obligation—is a major source of investor anxiety whenever Bitcoin suffers a sharp, sudden drop.

I know David actually made a video on this almost a year ago and it is still relevant to this day. Definitely check it out if you haven’t!

The Dangerous Truth About MicroStrategy’s Infinite Money Glitch

In short, MicroStrategy is in trouble when Bitcoin falls because its core business strategy is built on the long-term appreciation of BTC, which it funds heavily through borrowed money. That whole sentence is wild to read, honestly.