Important points:
- The strategy faces short-term liquidity constraints, but its modest 11% net leverage protects it from forced risk. $BTC Liquidation.
- As long as STRC trades below $100 and spot ETFs are showing net selling pressure, it remains unlikely that Bitcoin will rise above $70,000.
Bitcoin ($BTC) faced a 21% price correction in 10 days, retesting the $61,000 level for the first time in four months. This move coincides with Strategy (MSTR US)’s decision to buy back some of its corporate bonds and temporarily halt Bitcoin accumulation. Traders are now worried that Strategy may be forced to liquidate some of its Bitcoin holdings.
Strategy (MSTR US) Bitcoin Reserve Changes and Average Price. Source: Strategy
Strategy is the largest known Bitcoin buyer, having purchased 126,016 Bitcoins in total $BTC $9.31 billion since March. However, the company used $1.38 billion in cash The company raised funds through a recent equity issue to repurchase a portion of its convertible notes. The decision, announced on May 15, coincided with Stretch Preferred Stock (STRC US) moving away from $100.
Strategy Series A Perpetual Stretch Preferred Stock (STRC US). sauce: TradingView
STRC preferred stock allows Strategy to issue new shares every time the price reaches $100, providing holders with variable dividends. Currently set at 11.5% Paid in cash every month, every year. If the trader decides that $100 is not worth it anymore, a new buyer enters at a lower level. This is the same as demanding higher dividends. So, on the face of it, this should be a benign occurrence for Strategy’s risk perception.
Strategy raised $7.5 billion through a preferred stock issue in the first five months of 2026, which provided significant support for Bitcoin prices. The company now faces a tough road as its cash position has fallen to $900 million, enough to cover six months’ worth of dividends.
Financial Highlights for Strategy (MSTR US). Source: Strategy
Strategy Inc.’s net leverage of 11% is an important financial metric to monitor, as it represents the amount of debt the company has relative to its assets. By any standard, the coverage provided by your Bitcoin holdings, even at a price of $30,000, should be considered conservative.
Will Strategy be forced to liquidate some of its Bitcoin holdings?
While the short-term liquidity situation has certainly worsened, Strategy’s convertible notes do not have a contractual floor that would force it to liquidate its Bitcoin reserves. Additionally, MSTR stock may not be sold at a discount to its market-adjusted net asset value.
If the bond market is not available, the company may choose to dilute the stake of current MSTR holders. Whether this move is interpreted as weakness and further pressures MSTR and STRC prices is independent of Strategy’s leverage ratio, as the company remains financially strong.
Related: Saylor downplays Bitcoin drop as Strategy faces $11 billion paper loss
According to X user zeroxkyle, author of the Grand Line newsletter, even if Strategy eventually sells Bitcoin, its price will only fall faster and the liquidity situation will worsen. The analysis refers to a “doom loop” in which buyers refrain from adding to positions due to the constant fear that large sellers will enter the market.
There is no imminent risk of a forced sale in the strategy, so it is impossible to predict what will calm investors’ nerves. Preferred stock dividends are simply set aside for later, but can be suspended at any time. Still, as long as STRC remains below $100 and exchange-traded funds (ETFs) remain net short, Bitcoin is unlikely to rise above $70,000.
This article was created in accordance with Cointelegraph’s editorial policies and is for informational purposes only. It does not constitute investment advice or recommendations. All investments and trading involve risk. Readers are encouraged to do their own research.
