S&P Global Ratings recently assigned a long-term issuer credit rating of B- to Strategy Company, attracting widespread market attention. Previously, Strategy Company had positioned itself as a "Bitcoin development company," with a core strategy of raising funds through the issuance of stocks, convertible bonds, and preferred shares to purchase Bitcoin, rather than relying on cash flow from its main business.

This rating, while reflecting market concerns about its high Bitcoin holdings, insufficient dollar liquidity, and a singular business model, also indicates that Bitcoin is gradually being incorporated into the credit assessment framework of the traditional financial system.

S&P Global Ratings employs a grading system that ranges from high to low to assess the credit status of companies or debt issuers. Ratings are primarily divided into investment grade and non-investment grade categories.

Investment grade indicates relatively low risk and strong ability to fulfill obligations, including:

AAA: Highest credit quality, extremely low default risk

AA+ / AA / AA-: Extremely high credit quality

A+ / A / A-: Relatively high credit quality

BBB+ / BBB / BBB-: Moderate credit quality, lower end still considered investment grade

Non-investment grade (also known as speculative grade or high yield) indicates higher credit risk and greater likelihood of default, including:

BB+ / BB / BB-

B+ / B / B- (the level where Strategy is located)

CCC+ / CCC / CCC-

CC, C

D: Default

It can be seen that within the non-investment grade, B- is at the lower end, meaning the company is currently able to meet its financial obligations, but has a weak financial buffer and faces significant risks.

S&P Global Ratings outlined the main reasons for assigning Strategy a rating of "B-" in its press release, focusing on the company's high dependence on Bitcoin, insufficient liquidity, and weak capital structure:

First, excessive concentration of Bitcoin holdings and a singular business structure

S&P pointed out that Strategy's business model heavily relies on the rise in Bitcoin prices rather than diversified revenue sources, which exposes the company to significant risks during fluctuations in the crypto market.

Second, insufficient dollar liquidity and currency mismatch risk

The company's assets are primarily non-dollar assets like Bitcoin, while its debts, principal, interest, and preferred stock dividends are all denominated in dollars. S&P believes that this currency mismatch between assets and liabilities could amplify repayment risks during market turmoil.

Third, negative risk-adjusted capital

When calculating risk-adjusted capital, S&P views the large Bitcoin holdings as high volatility, high-risk assets and applies deductions. The results show that as of June 30, 2025, Strategy's risk-adjusted capital is "significantly negative."

Fourth, weak operating cash flow

S&P noted that the company's main software business is limited in scale, and profits mainly come from changes in the fair value of Bitcoin rather than stable operating income.

Fifth, reliance on capital market financing

Strategy frequently raises funds through the issuance of stocks, preferred shares, and convertible bonds to purchase more Bitcoin or meet financial obligations. S&P believes that if market liquidity tightens or Bitcoin prices drop significantly, the company will face risks of limited financing channels.

Sixth, convertible bond structure and maturity risk

Although the company has no major debts maturing in the next 12 months and currently manages maturities relatively well, most of its convertible bonds will mature after 2028. If Bitcoin experiences price shocks during this period, the company may still face refinancing pressure.

Although the rating is not high, S&P has given Strategy a credit rating outlook of "stable," meaning the rating is unlikely to be downgraded in the near term, but there is also a lack of sufficient basis for an upgrade. The stable outlook is predicated on the company's ability to continue managing its debt maturity structure properly, maintain open financing channels, and avoid significant Bitcoin price shocks.

A B- rating is typically associated with higher financing costs, as speculative-grade companies need to pay higher interest rates in the bond market to attract investors to take on additional risks. In other words, if Strategy continues to finance through bonds or convertible bonds in the future, its cost of capital and issuance conditions will be more stringent than before.

At the same time, a B- rating also sets a threshold for capital acquisition channels. According to institutional investment regulations, many pension funds, insurance companies, and some mutual funds are restricted from investing in securities rated below investment grade (BBB-). The downgrade significantly narrows the potential investor base for Strategy, constraining the diversity of capital sources.

More importantly, this rating conveys S&P's judgment on the company's operational risks: Strategy's business model has a high degree of uncertainty, and its financial stability largely depends on Bitcoin price trends, management's execution capabilities, and ongoing support from capital markets.

Nevertheless, for Strategy Company, this is not just a rating but a recognition from the market: the market is no longer merely paying attention to it but is formally assessing it. This may also explain why Michael Saylor has openly shared this rating result on the X platform.

Additionally, from a broader perspective, the transition from "unrated" to "non-investment grade rating" also signifies that the financing model supported by Bitcoin has matured enough to be modeled, assessed, and priced, and Bitcoin itself is no longer viewed merely as a speculative investment but is cautiously and clearly recognized as a legitimate corporate collateral asset.

In other words, Bitcoin is playing the role of traditional collateral such as real estate, accounts receivable, or inventory within this company—serving as the underlying support for the company's debt structure.

Ratings are not infallible "truths," but rather forward-looking opinions based on historical data, models, and subjective judgments. For example, the 2008 financial crisis exposed the limitations and conflicts of interest of rating agencies in assessing complex structured assets, becoming a classic lesson that ratings are not absolutely reliable.

At that time, the three major rating agencies—S&P, Moody's, and Fitch—generally assigned AAA ratings (highest investment grade) to U.S. subprime mortgage securities and collateralized debt obligations (CDOs). However, the underlying assets of these securities were actually a large number of high-risk, low-credit subprime mortgages. When the U.S. housing bubble burst, these "high-rated" assets plummeted rapidly, causing significant losses for many investors. The large amounts of AAA-rated subprime assets held by Lehman Brothers and Bear Stearns turned into "junk bonds" within just a few months, which was one of the key reasons for the collapse of both institutions.

After this crisis, the U.S. strengthened regulation of rating agencies through the Dodd-Frank Act, requiring the disclosure of model assumptions and potential conflicts of interest. However, the event also made global financial markets realize that ratings are not facts but opinions, and they may carry errors and lag.

In the field of crypto assets, the volatility of Bitcoin and other digital assets, the 24/7 market mechanism, on-chain liquidity, and auditability can all cause traditional credit models to face mismatches in parameters and assumptions. S&P's assignment of a "B-" rating to Strategy reflects the agency's efforts to incorporate crypto assets into existing frameworks, but it may also reflect the blind spots and compromises of using traditional models to measure new types of assets.

Related: AI learns to "pay": New crypto hotspot x402 market cap hits 8 billion, machine-driven economy is reshaping industry narratives

Original article: “B- has value: Strategy receives S&P 'junk bond' rating, launching the Bitcoin (BTC) corporate credit era”

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