Stock Price Plummets 80%, $20 Billion Loss in Six Months, How Much Longer Can Strategy Hold On?

Strategy currently has a total unrealized loss of approximately $9.79 billion.

Written by: Maher, Foresight News

As of summer 2026, the wave of bankruptcies in the cryptocurrency industry shows no signs of stopping. In July alone, AscendEX, BitMEX, and BitMart exchanges announced they would cease operations, causing panic in the market. As the risks spread, everyone's attention inevitably turned to the same name—Strategy. Strategy is the largest publicly traded holder of BTC globally, holding about 4% of Bitcoin. It may be the company least likely to fail in the crypto industry, yet it is now under scrutiny.

On July 30, its Q2 financial report shocked the market: a net loss of $8.22 billion for the quarter and a cumulative loss of $20.76 billion for the first half of the year. The unrealized loss on digital assets was $8.32 billion, with preferred stock dividend expenses of $400 million. The number of Class A common shares expanded from 292 million to 352 million over the past six months. MSTR has dropped from a peak of $543 in November 2024 to around $95 now, a decline of over 82%.

"Is Strategy the next domino to fall?" This question has repeatedly surfaced in discussions within the crypto community. For the crypto industry, Strategy has transformed from the biggest ally to the "largest uncertainty." It is no longer just the "spokesperson for Bitcoin" but has become a high-leverage entity of systemic importance. Its ability to successfully transform not only concerns the survival of a single company but could also determine the market's direction in the short term.

Daniel Yu, head of BIT Asset Management, stated that as long as BTC can rise above Strategy's average holding cost, its financing and interest payment pressures will naturally ease.

The problem lies in BTC's long-term stagnation in the $60,000 range or even below. No matter how strong the belief in BTC, it must withstand the test of a balance sheet that only speaks in numbers.

$20 Billion Loss in Six Months

Once thriving, Strategy now faces unavoidable difficulties during the downturn of the crypto market.

The Q2 2026 financial report shows that Strategy's losses reached $20 billion in six months. The market capitalization of stablecoin issuer Circle is only about $15 billion. If you started spending $1 million a day at age 20, it would take until age 75 to exhaust that $20 billion.

Strategy couldn't hold back any longer and finally chose to stop buying BTC after selling stocks for the first time.

On July 13, Strategy submitted an 8-K filing to the U.S. Securities and Exchange Commission (SEC), updating its ATM. The filing showed that during that week, the company did not sell any preferred shares, with sales of STRF, STRC, STRK, and STRD all at zero, but the sale of common stock MSTR amounted to $466.7 million, with 4,818,781 new shares entering the market in exchange for cash.

The unusual aspect is not the amount but the purpose. Reviewing Strategy's ATM issuance records over the past four years, its financing has almost followed a strict rule: funds raised are converted into Bitcoin holdings within days. However, this document clearly states that from July 6 to 12, the company did not purchase any Bitcoin. The $466.7 million did not flow into cold wallets but directly boosted its dollar reserves—from $2.55 billion on July 5 to $3 billion. This indicates a historic shift in the purpose of Strategy's ATM mechanism: transforming from a tool for "financing for hoarding coins" to a cash flow pipeline for "interest payment survival."

These numbers need to be viewed in a larger context. As of July 12, Strategy's remaining issuance limits are as follows: approximately $1.62 billion for STRF, approximately $17.51 billion for STRC, approximately $2.10 billion for STRK, approximately $4.01 billion for STRD, and approximately $23.79 billion for common stock MSTR. In total, there is about $49 billion in potential financing capacity remaining.

The key data is in the "Dollar Reserve Update" section. The document clearly states: the dollar reserve balance is $3 billion. This amount includes expected cash proceeds from shares sold through Strategy's ATM mechanism that have not yet completed settlement as of that date.

$3 billion. This figure increased by $450 million from the approximately $2.55 billion disclosed on July 5, aligning closely with the net proceeds of $466.7 million obtained from the ATM issuance of common stock that week. In other words, the increase in the company's dollar reserves did not come from cash flow from its main business, nor from the realization of Bitcoin appreciation, but from equity dilution.

During the same week, Strategy did not conduct any stock buybacks and did not purchase any Bitcoin. BTC holdings remained at 843,775 coins. This number decreased by 3,588 coins from the previously known 847,363 coins—exactly the amount sold at a loss disclosed on July 5.

So why did Strategy, for the first time in six years, issue new shares but not buy Bitcoin?

In August 2020, Strategy (then known as MicroStrategy) announced its first Bitcoin purchase of $250 million. Founder Michael Saylor transformed the company into a Bitcoin purchasing machine over the next four years, continuously buying through zero-interest convertible bonds, ATM issuances, and preferred stock financing. During this period, the company never sold Bitcoin, and Saylor publicly declared multiple times that he would "never sell coins."

Its stock price MSTR also soared, even briefly surpassing $500 by the end of 2024.

The turning point occurred in 2026. In May of that year, Strategy first signaled during the Q1 earnings call. Saylor stated at the time: we might sell some Bitcoin to pay dividends, just to give the market a warning. Subsequently, the company tentatively sold 32 Bitcoins at an average price of $77,135, still slightly above the average holding cost of $75,476, resulting in no loss.

In early July 2026, the company disclosed that it sold 3,588 Bitcoins between June 30 and July 2 at an average price of about $60,000, below the average cost by about $15,000, realizing a loss of approximately $55.45 million. This was Strategy's first loss-making sale since August 2020.

On July 13, the company disclosed zero Bitcoin purchases from July 6 to 12 but raised $466.7 million through common stock issuance, pushing dollar reserves to $3 billion.

From August 11, 2020, to July 30, 2026, Strategy executed 113 Bitcoin purchases, with an average purchase cost of $75,482 per coin.

The current market value of its holdings is approximately $53.9 billion, calculated at a BTC price of $63,879, with a total unrealized loss of approximately $9.79 billion, an overall unrealized loss of 15.37%.

These three steps form a clear financial logic chain:

Saylor's operational methods are very clever. Initially, he desensitized the market with "preventive needle" rhetoric, then tested market reactions with small loss sales; finally, while selling coins, he supplemented dollar reserves through equity financing. Both channels opened simultaneously, all pointing to the same exit—preferred stock dividend payments.

Strategy's software business generates annual revenue of about $500 million. However, its annualized interest obligations for preferred stock and convertible bonds amount to approximately $1.712 billion. Among them, just the STRC (variable rate perpetual preferred stock) product alone has a scale of up to $10.5 billion, with an annualized dividend expense of about $1.2 billion. The $500 million in revenue cannot cover the $1.7 billion in interest, and this gap has been filled in the past through continuous financing. However, as the financing environment tightens and stock prices come under pressure, the company is forced to open two new cash sources: selling coins and issuing new shares.

Saylor created the concept of a Bitcoin development company years ago. He said Strategy is not "hoarding" Bitcoin but "developing" it, just like a real estate developer buys land, develops it, and then sells it. He also mentioned a tax arbitrage strategy: "For every Bitcoin sold, you can buy back 10."

But the reality shown in the 8-K filing is that after selling Bitcoin, the company did not buy back any Bitcoin that week. Instead, it sold more stock.

Using stocks to sustain cash flow.

No line of execution, only a line of blood loss

The public's persistent concern about Strategy's potential collapse is perhaps understandable. After all, just four years ago, the FTX and LUNA incidents left a significant psychological shadow. However, Strategy's model design and mechanisms are fundamentally different from the former two, avoiding the immediate liquidation death spiral. Its only concern may be the long-term pressure on its financing model for buying coins, as BTC remains around or below $60,000.

Strategy's Bitcoin hoarding model has undergone multiple evolutions. Frontline technology investor Didier stated in an interview with Foresight News that there are mainly four categories:

• 1.0 Model (Stock Premium Driven): In the early days without ETF diversion, MSTR stock had a huge premium. The strategy involved selling stocks at a high premium and increasing BTC holdings.
• 2.0 Model (Ordinary Debt Driven): After the emergence of ETFs, funds were diverted, compounded by a bear market, leading to a narrowing of stock premiums. Pure stock ATMs became inefficient. The focus shifted to issuing bonds, primarily ordinary bonds, with interest rates around 5%-6%. However, Bitcoin itself does not yield interest, and the company needs to find cash flow to pay bond interest.
• 3.0 Model (Convertible Bond Driven): To avoid interest burdens, the company turned to issuing zero-coupon or very low-interest convertible bonds. The risk here is that if the stock price does not rise above the conversion price during a bear market, conversion cannot occur, and the principal must still be repaid at maturity.
• 4.0 Model (Perpetual Preferred Stock STRC Driven): To completely alleviate the pressure of "repaying principal in a bear market," perpetual preferred stock was introduced. This is key to understanding its balance sheet—perpetual preferred stock has a lower repayment priority than pure debt and convertible bonds.

To understand why Strategy has reached the point of selling coins, one must first understand its preferred stock structure. This is a financial engineering concept invented by Saylor over the past few years, and it is also a source of risk.
The company currently has several publicly traded perpetual preferred stocks: STRF, STRE, STRK, STRC, STRD. STRC is the largest and also the most concealed in terms of risk.
It employs a variable interest rate mechanism: If the monthly volume-weighted average price (VWAP) is between $95 and $99, the dividend rate is increased by 25 basis points each month; if it falls below $95, it is increased by 50 basis points each month. The initial interest rate was 9%, but as of June 2026, the STRC stock price had fallen below $90, forcing the dividend rate to be raised to 11.5%.
According to the financial report released in Q2 this year, by July, its dividend had risen to 12%. The payment frequency was also changed from quarterly to monthly, and then to bi-monthly.
Daniel YU, head of BIT Asset Management, stated that STRC is essentially a perpetual credit tool supported by BTC volatility, with a repayment priority below convertible bonds and above common stock. Its risk does not lie in a decline greater than MSTR, but rather in the variable dividend mechanism that automatically converts BTC declines into rising financing costs, shifting the risk from "price volatility" to "cash flow costs," ultimately borne by common stockholders in the form of equity dilution.
This means that Strategy's interest burden is not fixed but automatically increases as stock prices fall. The lower the stock price, the higher the dividend rate, the greater the payment pressure, the more panic in the market, and the lower the stock price—this is a typical negative feedback loop.
BitMEX Research accurately characterized STRC in an analysis report: "When the music stops, investors may feel somewhat offended." Greg Cipolaro, research director at NYDIG, pointed out that the appropriate way to assess STRC risk is to look at it from the perspective of "governance and subordination order," rather than just focusing on "whether it can afford the interest."
On July 27, Michael Saylor tweeted that he repurchased 288,930 shares of STRC at an average price of $86.52 per share, totaling $25 million, and plans to continue a regular, disciplined buying strategy, purchasing STRC when it is below $100. He intends to buy more at larger discounts and less as STRC approaches $100, with $975 million available for preferred stock purchases.
Daniel YU, head of BIT Asset Management, stated that Strategy will not experience a chain liquidation like FTX; the danger lies in the slow erosion of high-interest dollar liabilities on assets: the preferred stock dividend rate is 12% (initially 9%), and after the end of June this year, payments are made every half month, along with convertible bond interest, creating high cost pressure. If BTC remains above $60,000 or slowly declines, assets will be continuously eroded. The negative cycle: the more BTC falls, the weaker MSTR's stock price becomes, forcing its coupon rate to be raised, leading to greater payment pressure. This will again force Strategy to sell coins, entering a vicious cycle, so the core risk is "blood loss" rather than "liquidation." Whether STRC can return to the $95-$100 range is a key indicator recognized by the capital market.
On August 3, according to an 8-K filing submitted by Strategy to the SEC, the company sold 1,638 bitcoins at an average price of approximately $63,957 from July 27 to August 2, totaling approximately $104.7 million, of which about $52.4 million was used to pay preferred stock dividends, and about $52.3 million was used to repurchase STRC preferred stock. As of now, STRC has risen to around $92.
Didier emphasized that STRC is a perpetual preferred stock, not debt. The repayment priority of perpetual preferred stock is below that of convertible bonds, and dividend payments are at the company's discretion; they can be paid or not paid, and non-payment or deferral does not constitute a default. This is also the core reason why STRC will not fall into a death spiral like LUNA.

$4 billion reserves can last another 2.3 years

The resources of a company determine how long it can withstand adverse conditions. In past business history, many successful companies have often fallen into an abyss due to cash flow breaks during aggressive expansions. On August 3, Michael Saylor disclosed that this week, by selling approximately 3.01 million shares of MSTR common stock (net fundraising of about $290.6 million) and selling 1,638 bitcoins (about $104.7 million), the dollar reserves were raised to $4 billion, while repurchasing about $81 million of STRC preferred stock. In other words, the remaining resources have increased, providing more confidence in timely interest payments.

Strategy's previous predicament was the first domino in the grand narrative of corporate Bitcoin reserves.
At least 198 publicly traded companies worldwide have adopted Bitcoin reserve strategies, with total corporate holdings exceeding 1.26 million bitcoins. Strategy alone holds 842,138 bitcoins, accounting for the largest share of publicly known corporate holdings. If this most steadfast, aggressive, and financially engineering-savvy company has to sell coins to pay interest, what will happen to other imitators—especially those smaller companies that bought at higher prices and lack Saylor's financing capabilities?
Much of the premium that Strategy has enjoyed over the past few years has stemmed from the logic of "buy MSTR when you can't buy Bitcoin." Some institutions and companies, constrained by laws and regulations, cannot directly purchase BTC, making MSTR a viable alternative.
As ETFs become more widespread, this logic has weakened. Additionally, HashKey Capital fund manager Chaltan Wang stated, "Compared to BTC, MSTR has a higher beta return, which is also one of the reasons some people purchase it."
As of August 4, the total cumulative net inflow of U.S. BTC spot ETFs is $51.49 billion.
Saylor himself attributed the 13% drop in Bitcoin over a week in June 2026 to "funds rotating" towards AI. This may be true, but it also reveals a deeper issue: Bitcoin is losing its "uniqueness." From 2020 to 2021, it was the only compliant channel for institutional funds to enter the crypto world, but by 2026, it must compete for allocation funds with AI stocks, ETFs, and even other crypto assets.
Strategy has now bundled billions of dollars in preferred stock and billions in convertible bonds, becoming an extremely complex "high-leverage financial monster." When ETFs are cheap enough and safe enough, who will still be willing to pay a premium for MSTR, which is seen as potentially facing a chain liquidation reaction? This is the underlying logic for the complete breakdown of its premium spiral.
Strategy's dollar reserves, calculated against an annualized interest obligation of $1.712 billion, cover a period of about 2.3 years.
But this is a static number. It does not account for the possibility of STRC dividend rates continuing to rise, nor does it consider the continued decline in Bitcoin prices, leading to the dilution effect of ATM issuance on stock prices.
If STRC prices plummet, triggering bankruptcy-level discounts, or even lead to defaults on dividends for higher-tier preferred stocks like STRF, investors will gain voting rights on the board according to the terms. Saylor is using the dilution of retail investors through MSTR issuance to create cash reserves to repurchase his own issued junk high-interest debt, forcibly maintaining STRC prices from collapsing, which is a typical case of "using retail blood to prop up preferred stock."
However, Didier believes that the most dangerous period for Strategy has passed, as the root cause lies in the recovery of cash reserves and dividend coverage. Through stock sales and Bitcoin sales, cash reserves and dividend coverage have rebounded. The company still has about $1 billion worth of Bitcoin available for sale (with a cap of $1.25 billion) to enhance cash reserves, and the mine clearance phase has basically ended.

However, he also warned that institutions in the Asia-Pacific region that wish to imitate the Strategy model may face challenges. This model may seem simple, but 99% of followers will fail. The core reason is that it requires a "cult-like" CEO, as maintaining premium pricing, selling perpetual stocks, and spreading narratives necessitates a super opinion leader for continuous roadshows. Michael Saylor himself is the core asset. Additionally, while U.S. stocks can utilize unlimited ATM, markets like Hong Kong typically cannot issue more than 20%-25% annually, requiring special shareholder meetings and regulatory approvals for excess, making it non-replicable. Lastly, there are very few successful cases: globally, only two types have truly succeeded or once succeeded—those like MSTR in the U.S. with cult-like figures; and Japan's Metaplanet, which relied on tax arbitrage (where cryptocurrency trading is taxed at a maximum of 50% marginal income tax, while stock trading is only 20% capital gains tax, a 30 percentage point advantage), but this advantage is fading with Japan's tax reforms.

No Myths in the Crypto Industry

The crypto market has seen too many wealth stories and mythical figures, yet when Bitcoin prices drop, all these myths may just be the result of being in the limelight during a prosperous period. Those widely circulated promises, once regarded as golden rules, can easily be discarded in another timeframe. The decentralized narrative of the crypto industry is facing a crisis, and the mythical stories are beginning to retreat.

In 2020, Saylor stated, "Cash is trash." By 2026, he mentioned in a earnings call, "We might sell some Bitcoin to pay dividends." The company indeed did so—selling at a loss below cost.

This is not a betrayal of faith. On the contrary, it is faith being translated into mathematics by the balance sheet. Over 840,000 Bitcoins still lie in cold wallets, but the company has to start using them to pay bills. A $4 billion reserve seems ample, but its growth comes from equity dilution rather than business generation.

The Strategy has reached a crossroads. One path continues to issue more shares, sell coins, and use increasingly complex financial instruments to maintain interest payments until a critical point; the other path is to actively deleverage, shrink the preferred stock size, and accept a reduction in Bitcoin holdings.

Both paths lead to the same question: when diamond hands start counting change to pay dividends, the "never sell coins" church has already been dismantled. The remaining question is whether the entire crypto industry—those public companies imitating Strategy, those institutional investors treating MSTR as a Bitcoin leverage substitute, and those believing corporate reserves represent Bitcoin's ultimate adoption form—are ready to face a market without the Strategy myth.

Chaltan Wang, a fund manager at HashKey Capital, stated that the Bitcoin DAT model may usher in a more mature model, shifting from assets (BTC) serving the capital structure to the capital structure serving the assets. DAT will consider interest payments, dividend payments, liquidity management, credit ratings, and financing capabilities. In the future, the focus will not be on who buys the most BTC, but on "who can hold BTC long-term, sustainably, and at a lower cost." The overall evolution is from mere hoarding companies to mature alternative asset management firms, including cash flow management, financing cost management, and asset yield management.

With a $4 billion dollar reserve, Strategy has secured a 2.3-year breathing runway. In the crypto market, this is not short. However, on a balance sheet that requires $1.7 billion in interest payments annually, with core business contributing only $500 million, and interest burdens automatically increasing as stock prices fall, this is not long either.

Capital markets never believe in perpetual motion machines; they only acknowledge calculations that price risks transparently. Michael Saylor has sealed off the LUNA-like death spiral but has also reminded everyone with the wording of the terms: in this game, survival always trumps commitment.