Strategy Sets Critical Threshold for Bitcoin Price Decline

Strategy, a company involved in Bitcoin (BTC), has introduced a new indicator to gauge its ability to withstand sustained market declines. The metric, called the BTC Floor Annualized Rate of Return (ARR), calculates the annual rate of return needed for Strategy's financial coverage to remain sufficient despite a downward trend.

The ARR is based on several financial elements, including Strategy's reserves, net debt, and preferred shares, as well as annual charges related to interest and dividends. The company has set its critical threshold at an annual decline of 11.34% in BTC before reaching the critical limit.

Strategy estimates that it can absorb a sustained market decline of up to 10.79%, which corresponds to the breakeven financing threshold. Below this level, coverage falls below 1.0x, and the company considers restructuring some obligations.