Report: Strategy's $66 billion Bitcoin plan relies on capital markets, not prices

Strategy's large Bitcoin holdings may cushion a price collapse, but new analysis points out that the real risk is not Bitcoin volatility, but its continued access to capital market financing.

Regime Intelligence pointed out in a report that there is a potential mismatch between Strategy's balance sheet obligations and its financing capabilities-the company may have to sell Bitcoin more frequently to raise or refinance funds. This report has been shared with relevant media.

Research shows that Strategy holds 840,447 bitcoins, corresponding to approximately US$22 billion in debt and preferred stock claims. The report believes that this structure makes the company's "bitcoin accumulation" model rely on continued financing capabilities to cover huge obligations of approximately $1.76 billion per year-numbers investors should weigh when assessing downside risks.

Key Points

Regulatory Intelligence Corporation stated that Strategy firms 'risk exposure stems more from continued capital market access than from short-term Bitcoin liquidity or price shocks.

Its stress tests showed that Bitcoin would need to fall by about 96% before the value of its position could not cover convertible bonds-which meant a transfer of risk to cash flow obligations rather than mandatory liquidation.

Even if the price of Bitcoin falls significantly, Strategy will still have to pay approximately US$1.76 billion in preferred stock dividends and interest annually.

Investors should focus on strategic companies 'preferred stock prices and cash reserves; the report authors said cash reserves are currently about 2.6 times annualized expenses.

Analysts warned that if financing conditions deteriorate during a prolonged downturn, raising new capital could "become increasingly difficult or expensive," potentially reversing accumulation plans.

The real balance sheet risk lies

A common concern surrounding Bitcoin inventory reserve companies is that a rapid decline in Bitcoin prices could trigger a forced sell-off or similar margin call. Regulatory intelligence firms have different views on this, emphasizing that Strategy firms 'liabilities are different from traditional Bitcoin mortgages.

The report pointed out that Strategy's debt structure is not a margin product linked to Bitcoin price fluctuations, which means that there is no mechanism to automatically trigger a forced sale due to the decline of Bitcoin.

Instead, the report defines the key issue as whether the strategy company can continue to meet its obligations without reducing its Bitcoin exposure. In the scenario analysis, the regulatory intelligence firm calculated that Bitcoin would need to fall by about 96%, before the strategy firm's Bitcoin positions and reserves could not cover its convertible bonds. In other words, the critical point of "balance sheet coverage" is still far away.

The more immediate risk lies in cash flow: strategy companies must continue to pay dividends and interest on preferred shares. Based on the report's assumptions, these annual fees total approximately US$1.76 billion, regardless of the spot price of Bitcoin.

Capital markets are flywheel

Regulatory intelligence firms believe that the real pressure is not "Will Bitcoin collapse?" It's "Can strategy companies keep the financing flywheel running?" The authors believe that the ability to refinance, raise or obtain capital is key to strategy companies fulfilling their obligations without exceeding their cumulative plan to sell bitcoin.

report, told relevant media: "In my opinion, the main challenge for MSTR is to keep the flywheel running to cover annual debt and preferred stock expenses."

Saad also pointed out specific indicators that investors can focus on. He mentioned Strategy's preferred stock prices and cash reserves, noting that cash currently stands at about 2.6 times annualized expenses. This coverage indicator is important because it determines how long strategic companies can maintain their ability to pay even if market access is tightened.

But the report's most important warning is about the consequences when multiple risks are superimposed. Saad said that if Bitcoin falls for a long time and indicators related to Strategy's share price deteriorate in tandem with Bitcoin prices-a situation that increases capital costs or makes financing more difficult-then the problem will become even more serious.

Saad said: "During a prolonged decline in Bitcoin, if MSTR share price and mNAV (market net value) fall at the same time, the problem will become more serious." He added that capital will "gradually become more difficult to obtain or more costly."

This is important because it means that strategy companies 'accumulation strategies may be forced to turn earlier than investors expect-depending not only on Bitcoin price performance, but also on how equity and preferred stock pricing responds to market pressures.

Why recent Bitcoin sales have changed discussions

Historically, most of the attention surrounding Strategy's inventory reserve strategy has focused on Executive Chairman Michael Saylor's long-standing insistence on "not selling Bitcoin" stance. This position is often interpreted by Bitcoin advocates as a commitment to protect Bitcoin exposure even when faced with operational or financial obligations.

However, Strategy began selling Bitcoin this year, surprising some market participants who expected "never sell" to dominate decision-making. It has been previously reported that Strategy has sold bitcoins four times since May, including the most recent sale of 1,690 bitcoins. According to reports, the proceeds from the sale were used to pay dividends on preferred shares, conduct share buybacks, and build growing dollar reserves.

Although these sales behaviors contradict the simplest "never sell" narrative, Strategy's leadership still emphasizes that the overall cumulative trend remains positive. Strategy CEO Phong Le warned investors in a report earlier this year that the company has accumulated about "more than 25 times" the amount of bitcoins it has sold so far this year. Lay also told CNBC that Strategy plans to resume Bitcoin purchases later this year.

Regulatory Intelligence Corporation's analysis provides insight into this approach: Sales may be a tactical tool, but overall strategy relies on continued capital market access-because without it, companies may rely more on reserves and additional bitcoin sales to meet recurring obligations.

What should investors focus on next

At present, stress testing by regulatory intelligence firms suggests that strategy firms are not threatened by a sharp collapse in Bitcoin prices like margin structures, because the coverage threshold for convertible bonds is well below current levels. A more practical uncertainty is how financing conditions will evolve if a prolonged downturn simultaneously hits market indicators related to Bitcoin and Strategy Companies. Investors should pay attention to strategic companies 'preferred stock pricing, reserve levels, and signs of rising financing costs-as these factors determine whether the accumulation "flywheel" can continue to operate.