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When Strategy Becomes Constraint: The Risk Beneath Strategy’s Bitcoin Reserve

by Ram ben Ze’ev



When Strategy Becomes Constraint: The Risk Beneath Strategy’s Bitcoin Reserve (Source @strategy)
When Strategy Becomes Constraint: The Risk Beneath Strategy’s Bitcoin Reserve (Source @strategy)

Strategy (NASDAQ: MSTR) has spent the last five years presenting its Bitcoin treasury policy as a masterstroke of conviction: relentless, quarterly accumulation, regardless of price, with Bitcoin elevated from a speculative asset to a corporate reserve. On the surface, the numbers are impressive. More than 670,000 BTC acquired across 90 separate purchases since 2020, representing over 3% of all Bitcoin that will ever exist.


But it is precisely the consistency of this accumulation that now exposes the strategy’s most serious risks.



A close look at the acquisition pattern shows that a very large tranche of Strategy’s Bitcoin was acquired at prices well above the current market level of approximately $87,000 per BTC. Earlier purchases, made when Bitcoin traded far lower, provided a margin of safety and narrative credibility. Later purchases, particularly from late 2024 through 2025, were made into strength, materially raising the average purchase price toward the mid-$70,000 range.


At that point, the arithmetic changes. Every additional purchase at higher prices raises the average further. Every period of sustained weakness below it begins to work against the strategy rather than in its favour.


This is not a theoretical concern. Roughly half of Strategy’s Bitcoin holdings now sit near or above current market levels. If Bitcoin remains range-bound, or weakens further toward the end of 2025 and into 2026, the reserve ceases to function as a stabilising asset and instead becomes a source of balance-sheet pressure. Volatility is no longer absorbed by time alone; it interacts directly with leverage, investor expectations, and capital structure.


That interaction matters because Strategy’s Bitcoin position is not unencumbered. The company has repeatedly issued new equity and bonds to fund acquisitions and service existing obligations. Interest payments, dividend commitments, and refinancing cycles do not pause simply because Bitcoin is a long-term conviction. If prices stagnate or fall, the company may be forced to issue yet more shares or debt, diluting existing investors to meet obligations to earlier ones.


This is where the uncomfortable comparisons arise. Critics increasingly describe the model as resembling a “robbing Peter to pay Paul” structure, and some harsher critics have gone so far as to characterise it as a Ponzi scheme, in the sense that new capital is required not only to expand the reserve but also to service the financial commitments created by earlier rounds of financing. Whether or not one accepts that characterisation, the underlying dynamic is real: fresh capital becomes essential to sustain the structure and preserve the appearance of stability.



The dilemma is stark. If Bitcoin rises sharply, Strategy’s average purchase price rises with every future acquisition, demanding ever greater capital to maintain the same accumulation narrative. If Bitcoin falls, leverage increases, lender scrutiny tightens, and the risk of covenant pressure grows. In a severe downside scenario, demands from creditors could force asset sales into weakness — the very outcome the strategy claims to avoid.


At this scale, Strategy is no longer merely exposed to Bitcoin’s price. Bitcoin’s market structure is increasingly exposed to Strategy. That feedback loop magnifies both success and failure.


Michael Saylor’s vision rests on the assumption that time is infinite and capital markets remain endlessly accommodating. But markets are not theological constructs; they are cyclical, impatient, and unforgiving of extended drawdowns. Conviction alone does not service debt.


What began as a bold treasury experiment has evolved into something far more fragile: a position where the company may be damned regardless of outcome. Rising prices inflate averages and funding needs. Falling prices inflate leverage and risk. Between the two lies a narrowing corridor in which everything must go right, for longer than markets typically allow.


That is not a strategy without risk. It is a strategy whose risks are now structural.



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