Strategy suffers a $12.5 billion loss but continues to accumulate coins! Holding 818k BTC, is faith still a risk?

The $12.4 billion "paper loss" is merely an accounting figure on the books, not a real cash outflow. Almost all of these losses stem from unrealized losses required by fair value accounting standards; when Bitcoin prices fall, the loss figures increase, but the company has not actually sold any Bitcoin. This is the key starting point to understanding Strategy's Bitcoin "big gamble."

📊 1. The truth behind the massive loss: the "accounting game" of unrealized paper gains and losses

The so-called "$12.4 billion loss" is 99% due to unrealized fair value losses caused by Bitcoin price fluctuations. In Q4 2025, Bitcoin dropped about 22%, causing Strategy’s Bitcoin holdings to sharply decrease in market value, directly leading to a $17.4 billion operating loss, and ultimately a net loss of $12.4 billion, or -$42.93 per share, far below the expected $2.97.

But these are the opposite of "wealth on paper"—they are paper losses. In financial reports, this large-scale book loss is almost entirely "non-cash," reflecting accounting measurement differences, not actual cash outflows.

However, this does not mean Strategy is safe. Although book losses do not directly impact cash, they erode shareholder equity and constrain the company's refinancing ability, which can be especially deadly in a pessimistic market sentiment.

📉 2. Financial reports and stock price: the brutal truth in a bear market

On the first trading day after the financial report, Strategy’s stock price plummeted about 17%, nearly 80% below its all-time high in November 2024. This decline far exceeds Bitcoin’s own drop (52%), exposing the vulnerability of its "leveraged Bitcoin proxy" role in a bear market.

Strategy’s mNAV indicator (market value to Bitcoin holdings value ratio) plummeted from over 2.5 times in the bull market to 1.09, and briefly fell below 1 in early December, creating a rare "market value below coin holdings" discount phenomenon. This indicates the market is no longer willing to pay a premium for Strategy’s Bitcoin holdings, significantly weakening confidence in its business model.

💡 3. The "long game" of accumulation: a mathematical model rather than faith-driven frenzy

Strategy’s continued Bitcoin accumulation is not simply faith-driven but based on a closed-loop financial model:

1. The core metric is "Bitcoin Yield" rather than coin price movements

Strategy creatively defines the "BTC yield" metric, measuring the amount of Bitcoin per share rather than just the coin price increase. Its 2025 Bitcoin Yield reaches 22.8%, meaning that even if Bitcoin’s price retraces 30% from its high, the "coin amount" per share actually increases by 22.8%. This shows the company’s continuous buying and capital structure optimization successfully outpace the impact of falling coin prices.

2. Unique "rolling financing" system

Strategy sustains purchasing power through continuous rolling financing in the capital markets:

· ATM stock sales (market price issuance): the main source of funds. By issuing more MSTR shares at relatively high prices and quickly buying Bitcoin, creating a cycle of ongoing equity dilution and Bitcoin accumulation
· Zero-coupon convertible bonds: multiple issuances extending to 2030 (or at extremely low interest rates below 1%), delaying repayment pressure and avoiding interest burdens
· Preferred stock portfolio (STRK, STRC, etc.): these instruments come with fixed dividend obligations, such as STRC’s 11.5% annual yield, adding ongoing cash outflow pressure

3. Massive reserve "firewall"

By the end of 2025, Strategy has established a $2.25 billion USD reserve, specifically for covering the next 2.5 years of preferred stock dividends and debt interest payments, attempting to hedge liquidity risks. This acts as a cash buffer for its large Bitcoin holdings, preventing forced sales during prolonged Bitcoin downturns.

⚠️ 4. Cracks in the risk: three fatal contradictions

Contradiction 1: Slowing down the financing engine

In 2025, Strategy raised about $25.3 billion, accounting for roughly 8% of all US equity financing that year, and even about 30% of the convertible bond segment. This highly dependent market-driven model means that if market sentiment cools or MSTR’s premium disappears, funding sources will dry up. When mNAV falls below 1, Strategy can no longer "finance at a premium," and this cycle begins to stagnate.

Contradiction 2: Rigid payment obligations

While the preferred stock portfolio provides financing channels, it also entails ongoing annual dividend and interest obligations of about $1.5 billion. The current $2.25 billion reserve can cover roughly 1.5 years of these obligations, but if Bitcoin prices do not rebound in 18 months, the company will face severe liquidity tests—either forced Bitcoin sales or seeking new financing.

Contradiction 3: Founder’s tone shifts

Most notably, Michael Saylor, during the earnings call, for the first time admitted that "selling Bitcoin is also an option." This statement overturns his long-standing pledge of "buy and hold only," sparking deep market concerns about the stability of his long-term strategy. Although his intention was "that in extreme cases, small-scale sales might be necessary to pay dividends," the message immediately triggered market panic, with the stock dropping another 3% after hours.

🧭 5. The flagship in the bellows: affecting Bitcoin and being affected by Bitcoin

JPMorgan’s latest report indicates that Strategy’s financial stability has directly influenced Bitcoin’s price direction. JPMorgan analysts note: whether Bitcoin can sustain a rise to $170k depends less on external factors like gold prices and more on whether Strategy can avoid being forced to sell its Bitcoin holdings.

Meanwhile, Strategy faces major external threats:

· Index exclusion risk: MSCI proposes to exclude companies with over 50% digital asset exposure from mainstream indices, which could trigger passive fund outflows of up to $2.3 billion to $8 billion if implemented
· Supply chain premium: Bitcoin’s production cost is about $90,000, while Strategy’s average cost basis is approximately $75,537 (latest data updated to 818k BTC), below the cost price (considering the latest Bitcoin price of around $65k), deep in unrealized losses

💎 6. Conclusion: a moment of radical capital experimentation

Strategy’s story has gone beyond the traditional narrative of a listed company, becoming an extreme capital experiment. It’s not simply "faith" or pure "market risk control," but a combination of both—Saylor’s personal belief in Bitcoin’s long-term value, sustained by the financing model described above.

The most likely outcome: Strategy will not be forced into liquidation or bankruptcy by a Bitcoin crash, but its continuous accumulation rate will almost certainly slow down—due to vanishing premiums, rising funding costs, financial constraints on paper, and increasing cash outflow pressures.

On the other hand, if Bitcoin’s future decade continues to rise, Strategy’s "financial magic" may be remembered as prophetic; if Bitcoin enters a prolonged bear market, its leveraged structure will gradually reveal structural flaws.

Ultimately, whether Strategy can continue accumulating depends not on its "faith," but on whether its financing machinery can keep running, Bitcoin can regain high levels, and market confidence in its premium can be restored—three factors jointly determine its fate. Starting from an average cost of $75,537, this Bitcoin "flagship" is undergoing its most critical test.

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