Why Strategy Built a $1.44B USD Reserve for Bitcoin Risk

The Rise Of Bitcoin Companies

While Bitcoin rose to become one of the world’s largest financial assets, competing with the largest companies in the world and gold by market capitalization, a few strategies have been adopted by investors to profit from it.

There is, of course, the famous “HODL” strategy: buying Bitcoins directly and holding onto them, potentially until it has become the world’s reserve currency and the alternative to fiat.

Then there is the option to trade Bitcoin, leveraging the cryptocurrency’s volatility to further increase gains for astute traders.

And finally, there are several indirect ways to hold Bitcoin, from ETFs to companies that hold Bitcoin for their shareholders. The last category is best represented by Strategy (formerly MicroStrategy).

Represented by the charismatic and controversial figure Michael Saylor, the company has been busy accumulating as much Bitcoin as it could for years. Today, it holds 650,000 bitcoin, or about 3.1% of the 21 million bitcoin that will ever exist.

This turned Strategy’s stock into a proxy for Bitcoin—but one that could be bought by institutions or by individual accounts that normally would not be authorized to hold Bitcoin directly, like retirement funds.

Bitcoin’s rise in price and the growing importance of Strategy in the ecosystem made it a major player, evolving from its prior status as a respected but somewhat niche SaaS company.

Has Strategy’s Leveraged Bitcoin Plan Backfired?

This accumulation was done through a series of money-raising rounds, with the company using leverage to buy ever more crypto. Essentially, Strategy raised money when interest rates were at rock bottom and locked in capital at rates much below inflation to buy Bitcoin.

This worked great while Bitcoin’s price was rising. But with the current downward trend in price, the pressure has accumulated on Strategy, and the stock price has plummeted to nearly one-third of its peak value.

When we presented the company at the end of 2024, we explained that the stock price was valued higher than its Bitcoin holdings. This premium depended on the success of its aggressive “42/42 Plan” (an expansion of its earlier strategy) to acquire Bitcoin with corporate leverage: raising $42 billion through equity offerings and another $42 billion via fixed-income securities between 2025 and 2027.

So the current price only makes sense if the planned leverage of the “42/42 Plan” turns out to compensate for the current extra price an investor pays for Strategy’s Bitcoins.

With the current downturn, this is causing anxiety for both Strategy’s shareholders and Bitcoiners as a whole.

Because Strategy is not just a Bitcoin wallet but also a publicly listed company with obligations to debt holders, rumors have circulated that the company might be forced to sell some of its Bitcoins. Such a move would undoubtedly increase downward pressure on the Bitcoin price.

In large part, the concerns are about Strategy’s legal obligations to pay interest on its debt and dividends on its preferred shares. Interrupting these payments could crash the stock price further.

Why Strategy’s USD Reserve Matters for Bitcoin Investors

In a worst-case scenario, this could trigger a “doom loop,” where a falling Bitcoin price forces liquidation by Strategy, which in turn forces Bitcoin prices lower, triggering more liquidation, and so on.

Making sure that Strategy can uphold its obligations without forced liquidation is vital, both for the company and the Bitcoin market as a whole. This is not purely speculative; management has acknowledged that selling Bitcoin is a possible course of action, albeit a last resort.

“We can sell Bitcoin, and we would sell Bitcoin if we needed to fund our dividend payments below 1x mNAV.”
— Phong Le, Strategy CEO

This is why the news that Strategy is establishing a cash reserve—in US dollars, not Bitcoin—changes the narrative.

With $1.44B in reserves, this gives management breathing room and should reassure shareholders that no forced sale is imminent.

“In recognition of the important role we play in the broader Bitcoin ecosystem, and to further reinforce our commitment to our credit investors and shareholders, we have established a USD Reserve that currently covers 21 months of Dividends. We intend to use this reserve to pay our Dividends and grow it over time.”
— Phong Le, Strategy CEO

Does a USD Reserve Conflict With the Bitcoin-Maximalist Thesis?

The adoption of a fiat currency reserve in USD might seem at odds with the company’s previous support of Bitcoin replacing all other forms of money. After all, Michael Saylor previously said:

“Bitcoin is an ark of encrypted energy to escape the currency flood. The best strategy is to buy bitcoin and wait.”

However, the long-term goal of Bitcoin replacing fiat currency does not preclude short-term realism. For now, ensuring legal obligations are fulfilled and preventing the stock price from collapsing due to panic is more important.

“Establishing a USD Reserve to complement our BTC Reserve marks the next step in our evolution, and we believe it will better position us to navigate short-term market volatility…”
— Michael Saylor, Founder and Executive Chairman

Why Strategy Raised Cash Now Instead of Later

Another factor is that Strategy has largely raised money for Bitcoin purchases through the sale of company equity. If doubts about the company’s survival persist, it could durably damage the stock price, cutting off that funding source.

So, not only does the $1.44B cash raise help calm markets, but if Bitcoin enters a bear market for more than a year, it makes sense to raise money now rather than risking a capital raise when the stock price is much lower.

Rebuilding confidence is also achieved by showing that the company is not done accumulating. For example, it purchased 130 Bitcoin on Monday, December 1st, 2025, for an aggregate price of $11.7 million (approx. $90,000/BTC), funded through new share sales.

Moving Forward

Key Dates

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Strategy has $800 million per year of interest and preferred-share dividends to pay, for which the USD reserve should be sufficient.

However, the real test comes later. In September 2027, holders of $1 billion in convertible notes can exercise a “put option,” forcing Strategy to repurchase the debt early if the stock price remains depressed.

In addition, a massive $5.6 billion in convertible debt is out of the money and may need to be redeemed for cash in 2028.

So overall, the company is still a highly leveraged bet on Bitcoin. If the prices of Bitcoin and the company’s stock stay depressed for 2–3 years, it could get into trouble.

An alternative use of the fund could be to redeem some of the company’s preferred stock. That could have saved it over $150 million in annual interest payments, as it pays out a 10.75% rate—much higher than any treasury bill where the cash could be parked in the meantime.

What Will Determine Strategy’s Success Going Forward

Another key factor is the company’s debt rating.

In October 2025, S&P Global Ratings assigned Strategy a B- rating. This is a speculative-grade rating, confirming its “junk status” in the eyes of credit markets. This rating could result in Strategy being expelled from key MSCI indices, which have been buying the company stock in the past year.

This is a genuine threat, as much of the stock’s appeal was providing Bitcoin access to institutions restricted by investment charters. JP Morgan analysts noted:

“If Strategy is excluded from these indices, it could face considerable pressure on its valuation… Outflows could amount to $2.8 billion if Strategy gets excluded from MSCI indices and $8.8 billion from all other equity indices if other index providers choose to follow MSCI.”

Conclusion

The USD reserve created by Strategy is likely a prudent decision, as speculators increasingly attacked the company to force it to sell Bitcoin at the worst possible moment. By pushing any potential “squeeze” at least 2 years into the future, management has quieted the most alarming analysis.

However, investors should be aware that the large convertible debt load could force the company to face genuine solvency issues by 2027–2028 if prices (both of Bitcoin and the company’s stock) do not recover by then.

Financial tools like Strategy can provide extra returns through leverage, but this comes with additional risks. Investors should estimate carefully if the current prices make those risks worth taking.

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