Strategy Faces Tightening Margins as Bitcoin Pullback Tests Saylor’s Playbook

March 28, 2025 – Bitcoin-focused firm Strategy (MSTR) is approaching a pivotal moment after an aggressive wave of BTC accumulation has brought its average purchase price close to current market levels. With Bitcoin now trading around $87,000, down roughly 20% from recent highs, Strategy’s average BTC acquisition cost has risen to $66,000—narrowing its margin for error.

Over the past five years, the firm, led by Executive Chairman Michael Saylor, has amassed over 506,000 BTC (approx. $44B in value). The buying spree has largely been fueled by equity sales, convertible notes, and more recently, dividend-paying preferred stock—placing new pressure on the company’s cash flow.

Strategy now pays 8% annual dividends on STRK and 10% on STRF, in addition to 0.4% average interest on convertible debt. With its legacy software business contributing minimal cash, analysts warn that the company may need to continue issuing MSTR shares to stay afloat—risking dilution of existing shareholders.

“There’s a growing risk that future capital raises could depress MSTR stock more than they support Bitcoin buying,” said Quinn Thompson of Lekker Capital. “It’s a fine line they’re walking.”

Despite these concerns, Strategy has avoided major risks that plagued other crypto firms in 2022. Most of its debt is non-collateralized, and the only bitcoin-backed loan—a Silvergate deal—was repaid in 2023.

Still, some worry that leveraged ETFs like MSTX and MSTU, which hold over $3B in MSTR exposure, could amplify downside risk if fund flows reverse. These ETFs have propped up the stock with consistent buying pressure—but that support isn’t guaranteed.

Strategy’s evolving capital structure has been compared to a “financial seesaw” by Jeffrey Park of Bitwise, with different instruments appealing to different investor classes. But as obligations mount, and if BTC prices soften further, even Saylor’s well-constructed capital stack could face strain.

With Saylor having lost majority voting control in 2024, activist investor involvement is now a realistic scenario—especially if the firm’s performance falters or the stock trades at a steep discount to its bitcoin holdings.