Strategy's Debt Buyback Raises Solvency Fears as Bitcoin Crashes

Strategy faces tighter short-term liquidity, but its conservative 11% net leverage keeps it safely out of the forced BTC liquidation club. A Bitcoin rally above $70,000 looks unlikely as long as STRC trades under $100 and spot ETFs remain net sellers.

Bitcoin (BTC) absorbed a 21% price correction over 10 days, retesting the $61,000 level for the first time in 4 months. The drop conveniently coincided with Strategy (MSTR US) deciding to repurchase some corporate debt, briefly pausing its Bitcoin accumulation. Traders are now nervously eyeing whether Strategy might be forced to liquidate some of its Bitcoin stash.

Strategy had been the largest known corporate Bitcoin whale, accumulating 126,016 BTC for $9.31 billion since March. The company, however, used $1.38 billion in cash from recent equity issuances to buy back a slice of its convertible debt. The decision, announced on May 15, lined up with the Stretch preferred stock (STRC US) drifting away from $100.

The STRC preferred stock lets Strategy issue new shares whenever its price hits $100, and it pays holders a variable dividend—currently 11.5% annually, distributed monthly in cash. If traders decide $100 is no longer the going rate, new buyers pile in at lower levels, effectively demanding a juicier dividend. On the surface, this should be a non-event for Strategy's risk profile.

Strategy raised $7.5 billion through preferred stock issuances in the first 5 months of 2026, a flow that propped up Bitcoin's price. Now the company faces a rougher road, with its cash position trimmed to $900 million—enough to cover dividends for 6 months, assuming nothing else goes sideways.

Strategy's 11% net leverage is the key metric to watch, reflecting the amount of debt the company carries relative to its assets. By any reasonable standard, the coverage provided by its Bitcoin holdings—even at a hypothetical $30,000 price—looks conservative. No margin call theatrics here, at least on paper.

Will Strategy be forced to dump some of its Bitcoin? Short-term liquidity has clearly tightened, but there's no contractual floor in Strategy's convertible debt that would trigger a Bitcoin reserve liquidation. There's also nothing stopping the company from selling MSTR stock at a discount to its market-adjusted net asset value. Should debt markets dry up, the company could simply dilute existing MSTR holders. Whether the market would read this as weakness and pile more pressure on MSTR and STRC prices is beside the point—at least where Strategy's leverage ratio is concerned, the company would remain on solid ground.

Related: Saylor downplays Bitcoin slide as Strategy faces $11B paper loss

According to X user zeroxkyle, author of the "Grand Line" newsletter, an eventual Bitcoin sale from Strategy would only drag the price down faster, worsening liquidity. The analysis describes a "doom loop," where buyers hold back out of fear that a large seller is about to enter the market. It's hard to say what would soothe investor nerves, given that Strategy is nowhere near an imminent forced sale. Preferred stock dividends can be paused at will, though they simply pile up for later. Even so, as long as STRC keeps trading below $100 and spot exchange-traded funds (ETFs) stay net sellers, the odds of a Bitcoin rally above $70,000 look slim.

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