Strategy Faces New Risk as Bitcoin Price Soars

Strategy, a company that holds 4.02% of Bitcoin's total lifetime supply, has seen its shares rally 35% over the past month due to rising interest in Bitcoin. The cryptocurrency's price has increased by more than 20% over the same period, fueled by geopolitical conflicts and fears about the U.S. dollar's value.

Strategy owns 845,050 Bitcoins worth $63.5 billion, which is significantly higher than its enterprise value of $50 billion. Some investors believe that Strategy is undervalued relative to its Bitcoin holdings and expect its stock to eventually trade at a premium to those assets.

However, critics argue that the company's strategy of issuing preferred shares to fund its Bitcoin purchases and then selling Bitcoins to cover dividends is reckless. This loop may work as long as Bitcoin's price continues to rise and Strategy's preferred shares remain above par. But if Bitcoin's price plummets, Strategy won't be able to find enough buyers for its new shares, leading to a significant drop in cash flow.

Strategy has already sold 3,620 Bitcoins worth $272 million in the first half of 2026 to cover its preferred dividend payments. The company's critics argue that this is unsustainable and will lead to financial difficulties if Bitcoin's price declines further.