Interpreting Strategy's latest financial report: After a $12.4 billion loss, how much longer can Bitcoin's wheel keep turning?

When financial reports become an electrocardiogram of Bitcoin prices, Strategy is not just a company but an experiment about whether faith can overcome gravity.

Strategy is becoming the first publicly traded company in the global capital markets whose very life and death are entirely determined by the price of a decentralized asset.

On February 5th, this company announced a figure enough to cause any traditional business to collapse directly: a net loss of $12.4 billion in a single quarter.

But what’s truly worth paying attention to isn’t the $12.4 billion itself, but what it reveals: Strategy is no longer a company that can be measured simply by “profit” or “loss.”

The financial report shows that Strategy operated at a loss of $17.4 billion, with gross margin dropping from 71.7% last year to 66.1%. Nearly all of this $17.4 billion operating loss stems from a single source—unrealized asset impairment caused by Bitcoin’s price decline in Q4.

In plain terms, it’s because Bitcoin’s price on December 31 was lower than on September 30.

2025 is the first year Strategy applies fair value accounting across the board. Under this rule, every heartbeat of Bitcoin’s price directly impacts the income statement. Bitcoin rose in Q3, earning $8.42 per share, and everyone was happy; in Q4, as Bitcoin retreated, losses flooded in like a flood.

Strategy’s financial report reads more like a quarterly health check of Bitcoin’s price rather than a business performance report.

And the real issue lies here.

Two ledgers, two 2025s

After reviewing Strategy’s Q4 financial report, I found a fundamental reading barrier:

No matter which standard you use, its financial figures will deceive you.

First, the company’s own standard. Strategy invented an indicator called BTC Yield, measuring how much the number of Bitcoin per share of MSTR has increased.

This number for the full year 2025 is 22.8%, which looks impressive.

But this indicator only counts Bitcoin’s quantity, not its price. The company issued shares to raise funds when Bitcoin was at $100,000, and bought Bitcoin at $80,000; BTC Yield remains positive, but shareholders’ holdings are actually shrinking.

Additionally, the report mentions $8.9 billion in “BTC USD gains,” which is also the same problem.

This figure is calculated based on Bitcoin’s price of about $89,000 at year-end. On the day the report was released, Bitcoin had already fallen below $65,000. The snapshot on December 31 is no longer valid today, and there’s some lag.

Secondly, the US Generally Accepted Accounting Principles (GAAP), which all US-listed companies must follow.

According to these rules, Q4 shows a loss of $12.4 billion, and the full year a loss of $4.2 billion. The numbers are shocking but also not to be taken at face value.

2025 is the first year Strategy accounts for Bitcoin at fair value. Simply put: at each quarter’s end, look at Bitcoin’s market price; if it’s up, it’s profit; if it’s down, it’s loss—regardless of whether you’ve actually sold.

Bitcoin rose to $114,000 in Q3, showing a big paper profit; in Q4, it fell back to $89,000, and the $17.4 billion loss appeared. No actual money left the company.

So, the real situation of this financial report is:

Strategy’s own indicator avoids price risk, but the huge losses under accounting standards exaggerate the actual danger. Once you understand this, it’s clear how the execution in 2025 will unfold.

The company bought about 225,000 Bitcoin throughout the year, holding 3.4% of the global circulating supply, launched five types of preferred stock products, and held $2.3 billion in cash, reaching a record high. As a capital operation, it’s indeed a textbook year.

But all these achievements point to the same result: Strategy is more dependent on Bitcoin’s price movement than a year ago.

Therefore, the more Strategy does in 2025, the more justified it will have in 2026 for Bitcoin to rise. But right now, Bitcoin’s continuous decline clearly doesn’t meet Strategy’s expectations.

Bought Bitcoin for 25.3 billion, but generated an 888 million annual bill

In 2025, Strategy raised $25.3 billion, becoming the largest equity issuer in the US for the second consecutive year.

A company with quarterly software revenue of $120 million, raising funds at 200 times its software income. Almost all the money was used to buy Bitcoin.

How did they raise it?

It was simple before—issuing stock for cash. In 2025, they added a new step: the company issued five types of preferred stock, essentially re-packaging Bitcoin into fixed-interest financial products, sold to institutional investors seeking stable returns.

Bitcoin itself doesn’t generate any interest, but Strategy has created a financial product line with yields ranging from 8% to 11.25%.

So, what’s the cost?

By the end of the year, these preferred stocks plus debt interest generated about $888 million in rigid annual expenses. The company’s total software revenue was $477 million, which can’t even cover half of that.

Management’s response was to establish a cash reserve of $2.25 billion in Q4, claiming it’s enough to cover two and a half years.

But this money was itself raised by issuing shares at low prices. Saylor admitted on the earnings call that a few weeks of share issuance at the beginning of the year actually reduced the Bitcoin per share, diluting shareholders’ holdings.

He said he doesn’t plan to repeat this operation “unless it’s to defend the company’s credit.” Defending credit means paying that $888 million bill.

This is the core weakness of Strategy’s capital model:

Raising funds to buy Bitcoin requires maintaining a premium on the stock price, which depends on a good BTC Yield, which in turn depends on continuous buying of Bitcoin.

When Bitcoin rises, this cycle reinforces itself; when it falls, each link reverses. And now, there’s an additional fixed expense of $888 million each year that must be paid, regardless of Bitcoin’s price.

Unrealized loss of $9 billion, but short-term problems are not big

As of the day the February 5th report was released, Bitcoin had fallen to about $64,000. Strategy’s average cost basis is $76,052.

7,135,02 Bitcoin, total cost $54.26 billion, market value about $45.7 billion. This is the first time since buying Bitcoin in 2020 that the entire position is in an unrealized loss.

Four months ago, Bitcoin was near its all-time high of $126,000, and this position’s unrealized gains exceeded $30 billion.

But unrealized loss doesn’t mean crisis.

Strategy has no forced liquidation mechanism, unlike leveraged longs being liquidated in the crypto market. With $2.25 billion in cash, and rigid annual expenses of $888 million, it can sustain for two and a half to three years without raising more funds.

But “not raising funds” is precisely the state Strategy can least afford.

As mentioned earlier, this machine relies on continuous financing to buy Bitcoin. If it stops, BTC Yield drops to zero, and Strategy would revert to a passive Bitcoin fund without management fees but with high dividends.

Passive funds don’t need to trade at a premium; investors can just buy spot ETFs, which are cheaper and more transparent.

So, the risk of Strategy going bankrupt is much smaller than the risk of the Bitcoin flywheel stopping.

When will the flywheel be forced to stop? There’s a hard deadline.

Strategy holds about $8.2 billion in convertible bonds, with an average maturity of 4.4 years. The earliest redemption window is in Q3 2027. If Bitcoin’s price remains low then, bondholders can demand early redemption.

In the worst case, Strategy might need to sell a large amount of Bitcoin or find ways to raise cash during the market’s worst moments.

That window is about a year and a half away.

Whether the $2.25 billion cash reserve can last until then isn’t the issue; the real question is, after that, if Bitcoin hasn’t returned above the cost basis, what will Strategy use to respond?

The Price of Faith

The previous chapter said Strategy won’t die in the short term. But the market clearly doesn’t think so.

MSTR has fallen from its high of $457 in November last year to around $107 now, a drop of over 76%. Meanwhile, Bitcoin dropped from $126,000 to $65,000, a 48% decline.

Strategy’s stock price decline is 1.6 times that of Bitcoin, and its premium is rapidly evaporating.

However, Saylor himself shows no signs of retreat.

In the earnings call, Saylor admitted that cash reserves might be used to handle convertible bond redemptions and dividends, but he also insisted there’s no plan to sell Bitcoin.

As long as Bitcoin rises, this capital machine can reinforce itself, even seeming like a perpetual motion machine. But once prices stagnate or decline long-term, it will face the most straightforward test of the capital market:

Historically, no financial structure can permanently resist gravity through individual will. Will Strategy be any different?