Strategy shares swung in early trading Friday, mirroring volatile crypto markets amid fresh concerns over index eligibility and intensifying scrutiny of the firm’s highly leveraged treasury model.
With the stock already down more than 60% from last year’s peak and Bitcoin off over 30% from its October high, the market is reassessing whether Strategy’s balance-sheet approach can withstand a prolonged downturn across crypto assets.
Index Axe Meets Leverage Flywheel
A note from JPMorgan this week warned that Strategy could be removed from major benchmarks, including MSCI USA and the Nasdaq 100, after MSCI signalled that digital-asset treasury companies may be reclassified as investment vehicles rather than operating companies.
A potential exclusion could trigger as much as $2.8bn in passive outflows, with additional selling pressure if other index providers follow, the bank’s analysts said.
Strategy’s valuation premium has already eroded sharply. The firm’s mNAV - its enterprise-value-to-Bitcoin-holdings ratio - has slipped to around 1.2. This leaves the company trading just above the value of its underlying BTC reserves. The weakening premium heightens the sensitivity of the stock to index changes, funding conditions, and Bitcoin price moves.
Funding Window Narrows, Liquidity Cushion Remains
Beyond indexing risk, Strategy’s latest funding instruments are also under strain.
A rare euro-denominated preferred share sale, launched earlier this month at 80 cents on the euro, is reportedly now trading below 78 cents. Meanwhile, yields on the company’s 10.5% preferred securities have climbed to roughly 11.5%. The moves reflect tighter market conditions and diminishing appetite for leveraged exposure to Bitcoin.
Even so, Strategy continues to accumulate BTC. The firm bought more than $800mn worth in the past week, using proceeds from recent preferred share offerings. Analysts say the “flywheel” (issuing equity or preferreds to buy more Bitcoin) is now far less effective with token prices falling and funding costs rising.
Strategy has publicly insisted its position remains secure. In a post on X, it said that at current BTC prices, it has “71 years of dividend coverage” on its preferred shares and that annual Bitcoin appreciation of just 1.41% would fully offset dividend obligations.
The company holds nearly 650,000 BTC against about $16bn of combined debt and preferred equity, providing a material buffer unless Bitcoin experiences a sustained, multi-year depreciation.
Market focus now turns to the key catalysts of index provider decisions due by 15 Jan, and whether Bitcoin stabilizes after one of its steepest monthly declines since 2022.
For now, market trading signals that investors remain cautious, with Strategy’s model increasingly viewed through the lens of tightening liquidity and wavering institutional support.
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