Shares of Strategy, formerly MicroStrategy, are down approximately 16% in the year-to-date amid Bitcoin’s (BTC) ongoing correction.
The stock’s abrupt sell-off foregrounds longstanding questions about the sustainability of its Bitcoin buying spree. On Feb. 25, BTC’s price dropped around 4% to around $88,000.
The company’s “strategy is largely contingent on the ability to raise additional capital” backed by its growing Bitcoin treasury, The Kobeissi Letter, a market analysis firm, said in a Feb. 25 post on the X platform.
“In a situation where their liabilities rise significantly higher than their assets, this ability could deteriorate,” they said.
However, stock analysts remain bullish on MSTR’s prospects for a rebound.
On Feb. 6, analysts at Benchmark, a stock researcher, raised MSTR’s price target to $650, citing confidence that Strategy “will continue to aggressively raise capital to fuel its bitcoin acquisition strategy during the balance of the year,” according to a research note shared with Cointelegraph.
Strategy’s performance hinges on its ability to continually earn “Bitcoin yield.” Source: Benchmark
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Debt-fueled Bitcoin buys
Since 2020, Strategy has spent upward of $33 billion buying BTC at an average cost of around $66,000 per coin, earning an unrealized profit of more than $10 billion, according to data from MSTR Tracker.
It financed the buys with a blend of stock issuance and around $9.5 billion in convertible debt. Virtually none of Strategy’s debt matures until 2027 or later.
This significantly reduces the risk of a short-lived BTC price drawdown, forcing Strategy to liquidate Bitcoin holdings, The Kobeissi Letter said.
“For this to happen, Bitcoin would need to fall well over 50% from current levels and remain there” until 2027 and beyond, they said.
MSTR has outperformed most common benchmarks. Source: MSTR Tracker
Stock price outlook
On Feb. 25, Bitcoin fell below the $90,000 mark for the first time since November 2024 amid ongoing sell-offs in US spot Bitcoin exchange-traded funds (ETFs).
The same day, shares of Strategy fell by more than 10% to approximately $245, according to data from Google Finance.
The stock is down nearly 50% from all-time highs of $473 in November, shortly after Strategy unveiled its ambitious goal of buying $42 billion worth of Bitcoin by 2027.
Other companies following similar Bitcoin treasury strategies saw comparable retraces. Semler Scientific, which started buying BTC in 2024, is down more than 20% in the year-to-date, Google Finance data showed.
However, Benchmark believes in Strategy’s ability to keep generating “Bitcoin yield,” which measures the ratio of BTC holdings to outstanding shares.
It effectively sets BTC-per-share as a lodestar for Strategy’s financial performance. Strategy is targeting a Bitcoin yield of 15% for 2025.
“While many investors have been focused on MSTR’s market capitalization relative to its [net asset value], we believe a more valuable metric for assessing the company’s value is its BTC yield,” Benchmark said in an October note.
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