This article first appeared on GuruFocus.
Michael Saylor’s high-stakes Bitcoin strategy is facing a sharp market backlash, as shares of Strategy Inc. (NASDAQ:MSTR) formerly MicroStrategy have fallen 15% this month. Once celebrated as a pioneer in corporate Bitcoin holdings, the company’s premium over its Bitcoin assets has eroded to 1.57, down from 3.4 after Donald Trump’s re-election. The pullback comes despite an ongoing crypto boom, raising doubts about the sustainability of Saylor’s corporate-treasury model. A key pressure point stems from tepid demand for Strategy’s newly issued preferred stock, which raised only $47 million, falling short of expectations and forcing a return to common-share issuance despite earlier promises to limit dilution.
The model Saylor popularized borrowing and raising equity to accumulate Bitcoin has inspired other treasury-focused firms that now collectively hold more than $108 billion worth of the cryptocurrency, or roughly 4.7% of its supply. But as Strategy issues equity into a falling multiple, investor confidence could weaken further, potentially creating a negative feedback loop. Analysts note that the emergence of spot Bitcoin ETFs has intensified competition by offering direct exposure without the risks tied to corporate governance, leverage, or share dilution. Nearly one-third of publicly traded companies with Bitcoin reserves now trade below the value of their holdings, leaving smaller players especially vulnerable due to liquidity constraints and heavier reliance on convertible debt.
Investor sentiment is also shifting toward alternative digital assets, with Ether-focused treasuries committing more than $19 billion as attention diversifies. While Bitcoin prices remain supported by institutional allocations, many newer entrants have bought at levels above $100,000 and lack the business fundamentals to withstand volatility. Critics warn that if Bitcoin’s price were to fall sharply, enthusiasm for treasury-style strategies could fade quickly, compressing valuations across the sector. Supporters of Strategy, however, argue that maintaining capital flexibility may still benefit the company, particularly if it secures inclusion in the S&P 500 or if Bitcoin rallies strongly again.