Behind the Massive Loss of $12.4 Billion: Strategy's Bitcoin Big Bet and the Survival Crisis in the Spot ETF Era

When Bitcoin’s price fell below $63,000 in early February 2026, the Q4 financial results announced by Strategy Inc. (MSTR), founded by Michael Saylor, shocked the market: a net loss of up to $12.4 billion, primarily due to an unrealized loss of $17.4 billion from its Bitcoin holdings valued at market price.

This company, which once saw its stock soar over 3,500% in four years through a “financing to buy crypto” model, has now seen its share price drop nearly 80% from its all-time high in November 2024.

Key Event: Magnitude of Loss and Cost Inversion

Strategy’s latest financial report shows a net loss of $12.4 billion in the fourth quarter, mainly driven by an unrealized fair value loss of $17.4 billion due to accounting standards requiring mark-to-market valuation.

The company’s Bitcoin holdings are currently worth about $46 billion, with an average purchase cost of $76,052 per coin. This is significant — it marks the first time since 2023 that the company’s Bitcoin portfolio market value has fallen below its accumulated cost basis. As of February 6, 2026, Gate data shows Bitcoin trading at $64,452.2, about 15.3% below Strategy’s average cost.

In-Depth Analysis: Structural Reasons Behind the Massive Loss

Behind Strategy’s huge losses lies the structural risk of its business model. The core strategy has been to raise funds through issuing stock and bonds, heavily buy Bitcoin, and wait for prices to rise to realize gains. This model has operated successfully for years but now faces multiple pressures.

Financial data shows Strategy holds over 713,000 BTC, but with an average cost basis of $76,052 per coin. With Bitcoin trading well below this cost, Strategy’s books are now technically insolvent.

Even more concerning, the company carries $8.2 billion in convertible debt. Saylor emphasizes that the company has $2.25 billion in cash reserves, enough to cover interest and dividend payments for the next two years, but without margin call risk.

Fundamental Challenge: Dilemmas of the Financing-to-Buy-Crypto Model in the Spot ETF Era

Strategy’s business model is facing unprecedented challenges. With the launch of spot Bitcoin ETFs, investors now have cheaper, more direct risk exposure, diminishing Strategy’s uniqueness.

Previously, Strategy’s enterprise value was nearly twice its Bitcoin holdings’ value, but this premium has now been almost wiped out. The pressure from convertible debt is mounting: the $1.01 billion convertible bonds issued in September 2024 have a conversion price of $183.19, with holders able to exercise put options on September 15, 2027. The $3 billion zero-coupon convertible bonds issued in November 2024 have a conversion price of $672.4, with a put date of June 1, 2028. Several other convertible bonds will face put options in 2028.

Tiger Research analysts point out that 2028 will be a critical turning point for Strategy’s survival. At that time, the company could face approximately $6.4 billion in redemption pressure. If it cannot refinance through issuing new shares or bonds, it will be forced to sell large amounts of Bitcoin.

Market and Industry Impact: A Crisis of Confidence Spreading

Strategy’s predicament not only affects itself but also triggers widespread skepticism about Bitcoin corporate holdings. Currently, companies worldwide mimicking Strategy’s model hold over $108 billion in Bitcoin, representing 4.7% of circulating supply.

According to Capriole Investments data, nearly one-third of publicly listed companies that include Bitcoin on their balance sheets have stock prices below the value of their holdings. Market sentiment has shifted noticeably: Strategy’s mNAV (enterprise value to Bitcoin holdings value ratio) has fallen from a peak of 3.9 in November 2024 to about 1.2, the lowest since March 2023.

Benchmark Co. analyst Mark Palmer notes that, in the current environment, market focus has shifted to how companies can raise funds under challenging conditions. Broader concerns include that if Bitcoin prices remain depressed, more companies employing similar strategies may face the same predicament. S&P Global has warned that if Bitcoin prices experience severe pressure at debt maturity, companies may be forced to liquidate assets at low prices, which would be viewed as a “de facto default” debt restructuring.

Future Outlook: Survival Path and Market Evolution

In the face of the current crisis, Strategy’s management is trying to maintain an optimistic tone. Saylor reiterated a bullish stance during the earnings call, emphasizing, “We have a crypto president who is determined to make the US a Bitcoin superpower.” However, the market seems unconvinced. Phong Le admitted during the call that if Bitcoin drops 90%, the company will not be able to rely solely on selling Bitcoin to pay off debt and will have to seek debt restructuring.

Facing financial pressure, the company has begun adjusting its financing strategies. Strategy recently increased its preferred stock dividend rate to 11.25% in an attempt to attract investors. Meanwhile, the company continues issuing preferred stocks named STRC, STRF, STRK, and STRD to fund Bitcoin purchases. Yet, whether these measures will succeed remains uncertain. Notable short-sellers like Michael Burry have issued stern warnings, suggesting that Bitcoin’s decline could trigger a “death spiral” among corporate holders.

On the other hand, Gate’s long-term Bitcoin price forecast indicates an average price of $78,559.7 in 2026, above Strategy’s cost basis. If this forecast materializes, it could provide some breathing room for Strategy. By 2031, Bitcoin (BTC) could fluctuate around $210,873.2.

Strategy’s stock price has fallen nearly 80% from its November 2024 all-time high, with market capitalization evaporating hundreds of billions of dollars. Before the launch of spot Bitcoin ETFs, this company was one of the main indirect ways for investors to hold Bitcoin. Now, its unique “financing to buy crypto” model faces severe challenges, with the premium between enterprise value and Bitcoin holdings nearly erased. CEO Phong Le admitted during the earnings call that if Bitcoin continues to decline, the company may need to restructure debt and cannot rely solely on selling Bitcoin to pay it off. The ultimate outcome of this financial experiment may depend on the future trajectory of Bitcoin prices.