Four possible structural failures in the Strategy's Bitcoin fortress

Source: PortaldoBitcoin Original Title: Four Possible Structural Failures in Strategy’s Bitcoin Fortress Original Link: https://portaldobitcoin.uol.com.br/quatro-possiveis-falhas-estruturais-na-fortaleza-de-bitcoin-da-strategy/ Strategy announced that its perpetual preferred capital has grown and is now larger than its convertible debt, with US$ 8.36 billion in permanent capital surpassing US$ 8.21 billion in maturing debt.

While this marks an important milestone in defending the company’s colossal Bitcoin treasury, experts suggest that the design of this strategy may contain the seeds of a potential failure.

The strategic shift essentially swaps one risk for another

By replacing debt maturity dates with perpetual dividend payments, Strategy has built a financial shield of US$ 14 billion — but with severe structural flaws that, if triggered, could force the very liquidation of Bitcoin that this structure was created to avoid.

Perpetual preferred shares vs. convertible debt

Perpetual preferred shares, as the name suggests, are a form of permanent capital, with no maturity date. In simple terms, the company sells a special type of equity stake that never expires.

In exchange, buyers receive fixed dividends, but the principal never needs to be repaid. It’s like selling a slice of the company that pays a steady income forever, eliminating the risk of maturity but adding a continuous fixed cost in cash.

The company can hold this money indefinitely, as long as it pays the dividends — which, in this case, Strategy primarily finances through the sale of more shares, Bitcoin appreciation, or cash flow when necessary. Currently, the company has about US$ 2.25 billion in cash reserves against approximately US$ 876 million in annual dividend obligations from these perpetual shares.

The difference between these obligations and the US$ 463.5 million revenue “needs to be financed externally,” according to crypto market experts.

With US$ 2.25 billion in cash and the current rate of expenditure, Strategy has about 30 months of runway. Analysts warn that the company will eventually run out of cash, which would happen “if stock markets close completely for an extended period.”

This financing method has now grown to about US$ 8.36 billion — slightly above the old debt, according to recent announcement.

When Strategy began accumulating Bitcoin in August 2020, it used its existing corporate cash reserves. Soon after, it started issuing debt through convertible notes and shares.

It’s like borrowing money from a bank with a fixed term to buy a house. If property prices temporarily fall, you still need to pay the bank on time. In such cases, you might be forced to sell the house at a loss to settle the debt.

The company’s decision aligns with CEO and founder Michael Saylor’s “hold forever” thesis on Bitcoin, by eliminating the threat of forced sales to pay debts. The US$ 8.21 billion raised so far through convertible debt, with maturities between 2027 and 2032, has so far been refinanced with new share issuances or converted into shares — all without selling any Bitcoin.

Strategy’s first concrete test is a US$ 1.01 billion put option linked to the 2028 notes, which investors can exercise in September 2027, potentially forcing a cash payment if the stock price is too low.

With maturities of the convertible tranches between 2027 and 2032, the clock is ticking anyway.

Potential points of failure in Strategy’s maturity strategy

Saylor’s maturity manual assumes favorable conditions, but its failure modes are clear:

A prolonged bear market is the first threat. Hypothetically, if Bitcoin drops more than 50% and remains in a bear market for over two years, as in previous downturns, it erodes the premium of MSTR shares. Raising new capital becomes excessively dilutive, choking the financing model.

If MSTR’s stock price remains low, debt holders will not convert, and refinancing with new shares becomes impossible. If investor appetite disappears, the company may be pressured to pay obligations in cash or through Bitcoin sales — which represents the second structural failure.

Unlike convertible debt, which can be paused, preferred dividends require ongoing cash payments. If MSTR delays dividends, it signals financial stress. This signal causes the stock to fall. A lower stock price makes future share issuances more difficult. Harder issuances make future dividends less fundable. It’s a reputational feedback cycle.

The third potential failure point is MSTR’s high correlation with Bitcoin. Its status as a proxy for Bitcoin amplifies the movements of the main cryptocurrency. This characteristic initially helped the company refinance or raise more cash between 2020 and 2024, when the stock price surged during the Bitcoin bull market.

This dynamic has recently changed, with MSTR now amplifying the downward movement. The 32% drop in Bitcoin, from US$ 124,700 to US$ 85,000 between early October and late November 2025, caused a 52% decline in MSTR in the same period.

Bitcoin is trading below US$ 90,000, nearly 30% below its all-time high. A sharp correction from here could trigger an exodus of investors from MSTR, destroying its main tool — the sale of shares — to fund dividends and refinancing, dismantling the fortress from within.

Risks are deeply interconnected, and feedback cycles matter more than any isolated variable. The decline in Bitcoin’s price compresses the mNAV. This compression makes issuing shares destructive in value, eroding confidence and making dividend financing uncertain, which then drains cash. It’s a chain reaction.

mNAV, or Market-to-Net Asset Value, is a metric that compares a company’s market value with the real-time market value of its crypto reserves to determine if the stock is trading at a premium or discount relative to its reserves. If the mNAV is at a premium, it helps raise cash through share issuance.

These structural flaws form a feedback loop. A stress factor accelerates the others, pushing Strategy toward a possible death spiral.

The most likely negative outcome is not a spectacular implosion. It’s a slow wear-down where MSTR underperforms Bitcoin for years due to dilution, eventually becoming a cautionary example of corporate treasury strategies. Arguably, this is already happening.

Strategy’s experiment is an extreme balancing act between perpetual leverage and Bitcoin’s volatility. Its success consolidates a corporate Bitcoin model; its failure — forced liquidation of even a fraction of its 710,000 BTC — would be a seismic event for crypto markets, testing the resilience of the very asset it was created to support.