Strategy’s Bitcoin Sale Raises Solvency Concerns As Bitcoin Crashes

Key takeaways:

• Strategy faces tighter short-term liquidity, but its conservative 11% net leverage protects it from forced $BTC liquidations.
• A Bitcoin rally above $70,000 remains unlikely as long as STRC trades under $100 and spot ETFs show net selling pressure.

Bitcoin ($BTC) faced a 21% price correction in 10 days, retesting the $61,000 level for the first time in 4 months. This movement coincided with Strategy (MSTR US) company’s decision to buy back some corporate debt, temporarily pausing its Bitcoin accumulation. Traders now fear that Strategy could be forced to liquidate some of its Bitcoin holdings.

Strategy (MSTR US) Bitcoin reserve changes & average price. Source: Strategy

Strategy had been the largest known Bitcoin buyer, accumulating 126,016 $BTC for $9.31 billion since March. However, the company used $1.38 billion of cash raised by recent equity issuances to buy back some of its convertible debt. The decision, announced on May 15, coincided with the Stretch preferred stock (STRC US) distancing itself from $100.

Strategy Series A Perpetual Stretch preferred stock (STRC US). Source: TradingView

The STRC preferred stock allows Strategy to issue new shares whenever its price reaches $100 and offers holders a variable dividend, currently set at 11.5% annually, paid monthly in cash. If traders decide it is no longer worth $100, new buyers step in at lower levels, which is equivalent to demanding a higher dividend. So, at first sight, this should be a non-event for Strategy’s risk perception.

Strategy raised $7.5 billion through preferred stock issuances in the first 5 months of 2026, which was highly supportive of Bitcoin’s price. Now, the company faces a rough path, given its cash position has been reduced to $900 million, which is enough to cover dividends for 6 months.

Strategy (MSTR US) financial highlights. Source: Strategy

Strategy’s 11% net leverage is the key financial metric to monitor, as it represents the amount of debt the company holds relative to its assets. By any standard, the coverage provided by its Bitcoin holdings–even at a $30,000 price–should be considered conservative.

Will Strategy be forced to liquidate some of its Bitcoin holdings?

While short-term liquidity conditions have certainly deteriorated, there is no contractual floor set in Strategy’s convertible debt that would force a Bitcoin reserve liquidation. Moreover, there is no prohibition on selling MSTR stock at a discount to its market-adjusted net asset value.

If debt markets are not available, the company could opt to dilute current MSTR holders. Whether this move would be interpreted as a weakness and further pressure MSTR and STRC prices is irrelevant to Strategy’s leverage ratio, as the company would remain financially solid.

Related: Saylor downplays Bitcoin slide as Strategy faces $11B paper loss

According to X user zeroxkyle, author of the “Grand Line” newsletter, an eventual Bitcoin sale from Strategy would only bring its price down faster, worsening liquidity conditions. The analysis refers to a “doom loop” causing buyers to withhold from adding positions due to a constant fear of a large seller entering the market.

It is impossible to predict what would ease investors’ tension, as Strategy is in no danger of an imminent forced sale. The preferred stock dividends can be paused at will, although they merely accumulate for later on. Still, as long as STRC continues to trade below $100 and spot exchange-traded funds (ETFs) remain a net seller, odds for a Bitcoin rally above $70,000 are slim.