If refinancing fails in 2028, assuming the price of Bitcoin is $90,000, Strategy may need to sell approximately 71,000 Bitcoins.
Compiled by: Deep Tide TechFlow
As the price of Bitcoin declines, the market's focus shifts to DAT companies that hold large amounts of Bitcoin. Among them, Strategy is one of the most prominent players in this group. The key question is how this company has accumulated its assets and how it manages risk amid increasing market volatility.
Key Points
Strategy's estimated static bankruptcy threshold in 2025 is about $23,000, nearly double the $12,000 level in 2023.
The company changed its capital raising model in 2024, shifting from simple cash and small convertible bonds to a diversified structure that includes convertible bonds, preferred stock, and ATM issuance (At-The-Market Issuance).
The call options held by investors allow for early redemption. If the price of Bitcoin falls, investors may exercise this option, making 2028 a critical risk window.
If refinancing fails in 2028, assuming the price of Bitcoin is $90,000, Strategy may need to sell approximately 71,000 Bitcoins. This amounts to 20% to 30% of the average daily trading volume, which would put significant pressure on the market.
1. Questions About Strategy's Stability
The recent decline in Bitcoin has led to a general drop of about 50% in DAT company stocks, raising a core question in the market: Can Strategy maintain stability when both its stock price and core assets are declining? This concern was further exacerbated when JPMorgan pointed out that Strategy might be removed from the MSCI index.
The market's focus is not just on stock performance. The amount of Bitcoin held by Strategy is sufficient to impact the entire market, far exceeding that of typical "whales." This raises two key questions:
At what price level will Strategy's balance sheet collapse?
When and under what conditions might the company impact the market?
This report explores Strategy's effective bankruptcy threshold, periods of heightened risk, and potential market impacts under stress scenarios by analyzing documents from the U.S. Securities and Exchange Commission (SEC).
2. Is Strategy at Risk: The $23,000 Threshold
Before delving into specific analysis, we need to clarify the concept of "static bankruptcy." Static bankruptcy refers to a situation where a company cannot repay its liabilities even if it liquidates all its assets.
In simple terms, static bankruptcy occurs when liabilities exceed assets. For example, if a company, Echo, has properties worth 1 billion won and 100 million won in cash but liabilities of 1.2 billion won, the company is technically insolvent from a balance sheet perspective. The situation is similar for DAT companies. If the price of Bitcoin falls below a certain level, the book equity will turn negative, and the company will be unable to meet its debt obligations. This price level is referred to as the "static bankruptcy threshold."
To determine Strategy's static bankruptcy threshold, we first need to understand how the company has accumulated its Bitcoin holdings.
Since 2020, Strategy has held Bitcoin as a strategic asset, but its accumulation model changed after 2023. Prior to this, the company primarily relied on cash reserves and small convertible bonds to purchase Bitcoin, maintaining a holding of around 100,000 Bitcoins, with relatively limited refinancing obligations.
**Starting in 2024, the company changed its fundraising approach. By issuing *preferred stock*, implementing an *ATM* stock program (At-The-Market Stock Program), and conducting large-scale convertible bond issuances, Strategy increased its leverage to fund more Bitcoin purchases.**
This strategy led to a rapid increase in Bitcoin holdings. The structure created a cycle: rising Bitcoin prices drove up the company's market value, enabling it to obtain higher leverage and support further purchases.
Although its goals remained unchanged, the mix of funding sources and risk characteristics shifted. This structural change has now become a core factor in increasing Strategy's bankruptcy risk.
Estimates suggest that Strategy's static bankruptcy threshold in 2025 is around $23,000. Below this level, the value of its Bitcoin holdings would fall below its liabilities, putting the company in a state of insolvency on its balance sheet.
A key point is that this threshold is rising. In 2023, the company could withstand a Bitcoin price of about $12,000; by 2024, this threshold rose to $18,000, and in 2025, it reaches $23,000. As Strategy continues to expand its Bitcoin holdings, its critical levels also increase.
Therefore, $23,000 is the minimum Bitcoin price required to maintain the company's stable operations. This means that Bitcoin prices would need to drop about 73% from current levels to trigger bankruptcy risk for the company.
3. Convertible Bonds: The Issue is the Investor Put Option, Not Maturity
As mentioned earlier, Strategy's static bankruptcy threshold has risen to $23,000 because its liabilities are growing faster than its Bitcoin holdings. The next question is how these debts are structured.
Between 2024 and 2025, Strategy adopted a new capital raising model that combines convertible bonds, preferred stock, and the ATM stock program (At-The-Market Stock Program). Among these financial instruments, convertible bonds make up the largest proportion and have the most significant impact on the market.
The key issue is not the size or maturity of the convertible bonds, but the timing of the investor put option.
The investor put option (Holder Put) allows investors to demand early repayment of the debt, which the company cannot refuse. Most of the large convertible bonds issued between 2024 and 2025 have put dates concentrated in 2028, making 2028 a critical year for Strategy to demonstrate its refinancing capability.
If the price of Bitcoin is close to the bankruptcy threshold in 2028, or if market conditions worsen, investors are likely to choose to exercise their put options rather than wait for the bonds to mature. A wave of concentrated put option exercises would force Strategy to raise billions of dollars in cash immediately.
The problem is that the funds raised from these convertible bonds were almost entirely used to purchase Bitcoin. If these funds had been used for productive assets that generate cash flow, the company would have a natural source of repayment. However, since the funds are concentrated on Bitcoin accumulation, the company has little cash available for redemption.
Therefore, repayment funds would have to be raised through asset sales. If the Bitcoin price is low when the put window opens, Strategy may face an immediate liquidity shortage. Being forced to sell Bitcoin would further depress prices, raise the bankruptcy threshold, and potentially trigger a negative feedback loop.
4. Preferred Stock: Why Choose a 10% Dividend Burden?
Starting in 2025, Strategy no longer issues near-zero coupon convertible bonds but instead turns to issuing preferred stock with a dividend rate of about 10%. On the surface, this seems like a more expensive option.
However, this decision reflects the increasing refinancing pressure from 2027 to 2028. The risk of investors concentrating their put options (Holder Put) in 2028 significantly increases mid-term repayment risk. During this period, any sustained cash outflow could elevate bankruptcy risk.
A key feature of preferred stock is that its dividends do not need to be paid in cash. Strategy designed a flexible structure at issuance that allows dividends to be paid in stock when necessary. This enables the company to raise capital without immediately consuming cash while fulfilling dividend obligations without using cash. In effect, preferred stock helps the company avoid being forced to sell Bitcoin due to cash shortages during the critical 2027 to 2028 period.
Although a 10% dividend rate may seem costly, the ability to pay dividends in stock makes it an effective tool for retaining liquidity and avoiding short-term cash crises.
However, this structure also brings new challenges. Paying dividends in stock leads to ongoing dilution for common stockholders. Strategy already faces dilution risks from future conversions of convertible bonds, and preferred stock further increases equity pressure.
Additionally, preferred stock has preferential claim rights. If the company faces dual pressures from debt repayment and operating costs, the rights of preferred stockholders must be prioritized over those of common stockholders. While preferred stock does not have a fixed maturity date, its dividend obligations effectively represent a structural fixed cost, impacting the company's effective bankruptcy threshold.
By 2024 to 2025, Strategy has shifted from relying on low-cost convertible bonds to a structure composed of convertible bonds, preferred stock, and ATM issuance (At-The-Market Issuance). This transition has driven rapid expansion of Bitcoin holdings in the short term.
5. What Happens if Strategy Fails?
If Strategy fails to complete refinancing in 2028, its impact on the market can be estimated through its debt obligations.
Between 2024 and 2025, the issuance of large-scale convertible bonds will bring about $6.4 billion in potential repayment demands in 2028. If market conditions worsen, the financing channels for preferred stock issuance, ATM issuance (At-The-Market Issuance), and new convertible bonds will become unavailable, leaving the company with no choice but to sell Bitcoin.
Assuming the price of Bitcoin is $90,000, Strategy would need to sell approximately 71,000 Bitcoins to meet these obligations. This scale of sale far exceeds typical institutional sell-offs.
Currently, the average daily trading volume in the spot market is about $20 billion to $30 billion. Selling 71,000 Bitcoins at a price of $90,000 amounts to about $6.4 billion, which represents 20% to 30% of the daily trading volume. Completing such a large-scale sell-off in a short period would almost certainly exert significant downward pressure on prices.
The greater concern is that such sell-offs are not one-time events. As the price of Bitcoin declines, the value of Strategy's assets will immediately decrease, thereby weakening its financial ratios. This further limits its fundraising capabilities and may force the company to conduct more Bitcoin sell-offs.
The ultimate result could form a negative cycle: refinancing failure leads to forced sell-offs, the decline in Bitcoin prices further reduces asset values, pushing the company toward more forced sales. Even if this dynamic lasts only a few quarters, it could deteriorate the balance sheet to an irreparable state.
Therefore, Strategy's structural risk is concentrated in 2028. Outside of this window, its leverage model appears manageable, but a failure to refinance in 2028 could trigger sell-off pressures significant enough to impact the entire Bitcoin market.
Thus, 2028 is not only a critical year for Strategy's survival but may also become an important inflection point for the overall volatility of the Bitcoin ecosystem.
6. Strategy is Relatively Stable, but Latecomers Face Higher Risks
The market often simplifies the risks of DAT companies to a single question: Can the company survive each downturn in Bitcoin? However, this analysis indicates that survival does not depend on short-term price fluctuations or stock volatility, but rather on the design of the company's balance sheet and capital structure.
Therefore, assessing DAT companies cannot rely solely on their stock prices or declines in Bitcoin prices. Key indicators include the position of their static bankruptcy threshold, the timing of cash repayment pressures, and the financial instruments used to fill funding gaps. These factors provide insights into structural resilience rather than short-term noise.
Of course, not all risks can be predicted. ETF fund flows, macroeconomic conditions, and regulatory changes can alter the market environment at any time. Nevertheless, the most reliable assessment basis remains the bankruptcy threshold reflected in financial data and the company's cash flow operating mechanisms.
In this regard, Strategy has a significant advantage. It entered the Bitcoin market in 2020, experienced the market downturn in 2022, and accelerated asset accumulation through leveraged financing in 2024. Its combination of convertible bonds and preferred stock has built a multi-layered buffer.
Thus, Strategy has a relatively stable foundation. In contrast, those new entrants to the market have not established a validated DAT framework, and their ability to withstand significant price declines is far from certain.
This report aims to provide a foundation for assessing DAT companies through quantifiable signals rather than fear or optimism, highlighting the truly important structural risks.
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