Strategy, the world's largest corporate Bitcoin holder, maintains its balance sheet could withstand a catastrophic drop in Bitcoin to $25,000 - 66% below its average purchase price - even as the company faces mounting pressure from a potential MSCI index exclusion that could trigger up to $8.8 billion in forced selling.
The company emphasized its financial resilience through what it calls the "BTC Rating" system, which measures Bitcoin collateral coverage against debt obligations. At current Bitcoin prices near $87,000, Strategy's 649,870 BTC holdings valued at approximately $56.5 billion provide a 6.9-times collateral buffer against its $8.2 billion in convertible debt. Even in a worst-case scenario with Bitcoin at $25,000, the assets-to-debt ratio would remain at 2.0 times, the company stated.
"If BTC drops to our $74,000 average cost basis, we still have 5.9x assets to convertible debt, which we refer to as the BTC Rating of our debt. At $25,000 BTC, it would be 2.0x," the company posted on X, formerly Twitter. The statement comes as Strategy's stock has plunged 49% from its October peak, trading at levels last seen in late 2024. The company, which rebranded from MicroStrategy to Strategy in February 2025, now faces its most significant structural challenge: potential removal from major equity indices.
What Happened
Strategy holds 649,870 BTC acquired at an average cost of $74,433 per bitcoin for a total expenditure of $48.37 billion, according to company disclosures filed Nov. 17. At current prices, this represents approximately $13 billion in unrealized gains, making Strategy the largest corporate Bitcoin holder globally with more than 3% of Bitcoin's total supply.
The company's capital structure includes $8.214 billion in convertible debt with maturities spanning 2028 to 2032, carrying individual BTC Ratings ranging from 7x to more than 50x coverage. Below the debt layer sits $7.779 billion in preferred stock across five series: STRF (Strife), STRC (Stretch), STRE (Stream), STRK (Strike), and STRD (Stride). These perpetual preferred securities carry dividend rates between 8% and 10.5% annually. Combined, Strategy's total obligations amount to approximately $15.993 billion. At current Bitcoin prices, these liabilities are supported by a consolidated BTC Rating of 3.6x, meaning the company holds more than three and a half times the value of its outstanding obligations in Bitcoin-denominated assets.
The resilience calculation assumes Bitcoin drops to $25,000 - a 71% decline from current levels and 66% below Strategy's average purchase price. At that hypothetical valuation, Strategy's 649,870 BTC would be worth $16.2 billion, still double its $8.2 billion convertible debt obligations.
However, the broader challenge intensified Nov. 20 when MSCI announced it is considering rules that would exclude companies whose digital assets exceed 50% of total assets from its benchmark indices. Strategy's Bitcoin holdings represent approximately 77% of its balance sheet, placing it squarely in the crosshairs of the proposed policy change.
Why It Matters
MSCI's decision, expected Jan. 15, 2026, could trigger massive forced selling from passive funds that track major indices. JPMorgan strategist Nikolaos Panigirtzoglou estimates approximately $9 billion of Strategy's $59 billion market capitalization is likely held in passive investments through ETFs and mutual funds tied to major benchmarks.
"With MSCI now considering removing MicroStrategy and other digital asset treasury companies from its equity indices…outflows could amount to $2.8 billion if MicroStrategy gets excluded from MSCI indices and $8.8 billion from all other equity indices if other index providers choose to follow MSCI," JPMorgan analysts wrote in a research note.
The company was already excluded from S&P 500 consideration in September despite meeting quantitative requirements on market capitalization, liquidity and profitability. The index committee selected Robinhood and AppLovin instead, citing concerns about Strategy's concentrated Bitcoin exposure and volatile earnings driven entirely by cryptocurrency price movements.
Adding to challenges, Strategy broke its six-week consecutive Bitcoin buying streak last week, pausing accumulation as its market-cap-to-net-asset-value premium collapsed toward parity at approximately 1.16x - the lowest level of the current cycle, according to CoinDesk. The premium historically traded between 2x and 3x during bull markets, allowing Strategy to issue shares at favorable valuations to fund additional Bitcoin purchases. Executive Chairman Michael Saylor defended the company's structure on Nov. 21, stating: "Strategy is not a fund, not a trust, and not a holding company. We're a publicly traded operating company with a $500 million software business and a unique treasury strategy that uses Bitcoin as productive capital."
Despite the downturn, Strategy continues raising capital through its preferred stock platform. The company raised $20.8 billion in 2025 through a combination of $11.9 billion in common equity, $6.9 billion in preferred equity, and $2 billion in convertible debt, according to recent regulatory filings.
Final Thoughts
Strategy's assertion of balance sheet strength contrasts sharply with its stock performance. Shares closed Nov. 25 around $172-$173, down approximately 68% from the 2025 peak above $540. The company trades at roughly 1.1x its Bitcoin holdings, the narrowest premium since it began its Bitcoin accumulation strategy in August 2020.
S&P Global Ratings assigned Strategy a "B-" credit rating in October, citing "high bitcoin concentration, narrow business focus, weak risk-adjusted capitalization, and low U.S. dollar liquidity." The rating reflects Strategy's ability to meet debt obligations under current conditions but acknowledges significant default risk if market conditions deteriorate.
The company's annual dividend and interest obligations total $689 million, representing less than 1% of its Bitcoin holdings at current prices. This includes $35 million in interest expense on convertible notes (0.42% average cost) and $654 million in preferred stock dividends across its STRF, STRC, STRK, STRD, and STRE series.
Strategy has also taken steps to diversify custodial risk. Blockchain analytics firm Arkham reported the company transferred 165,709 BTC worth $14.5 billion to Fidelity Custody over recent months, splitting holdings between multiple regulated providers alongside its existing Coinbase custody relationship.
While Strategy's Bitcoin-backed balance sheet provides substantial downside protection against price volatility, the MSCI decision represents a different category of risk - structural forced selling unrelated to the company's financial health or Bitcoin's fundamental value. The Jan. 15 ruling will determine whether Strategy remains a mainstream equity proxy for Bitcoin or gets pushed to the margins of public markets due to its unprecedented digital asset concentration.
With Bitcoin trading near $87,000, Strategy maintains a 16% unrealized gain on its holdings. However, a drop below $70,000 would eliminate paper profits entirely, potentially triggering additional scrutiny from credit markets and equity investors alike as the company navigates its most consequential period since founder Michael Saylor transformed the former software company into the world's first Bitcoin Treasury Company.
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