MicroStrategy (Strategy) released its earnings report for the fourth quarter of 2025, revealing alongside the report a severe bearish scenario that could start to pressure its Bitcoin treasury model.
The CEO's comments revealed a rare insight into how far the market could decline before the company's capital structure comes under serious pressure.
MicroStrategy finally reveals what its breaking point will be as the price of Bitcoin drops.
During the recent earnings discussion, MicroStrategy CEO Fung Lee stated that a 90% drop in Bitcoin to around $8,000 will represent the point at which the company's Bitcoin reserves are nearly equal to its net debt.
At that level, the company would likely become unable to repay the convertible bonds using only its Bitcoin holdings, and as a result, it may need to consider restructuring, issuing new shares, or raising additional debt over time.
Leadership emphasized that such a scenario is considered highly unlikely and will unfold over several years, giving the company time to respond if markets deteriorate significantly.
He said to me: "In the extreme bearish scenario, if there is a 90% drop in the price of Bitcoin to $8,000, which is truly hard to imagine, this is the point at which our Bitcoin reserves equal our net debt and we will no longer be able to pay our convertible bonds using Bitcoin reserves and will have to consider either restructuring, issuing more stock, or issuing additional debt. And I invite you to remember: this happens over the next five years, so I don't feel worried at the moment, even if the price of Bitcoin drops."
At the same time, he noted that Lee's comments come just months after a strategic director acknowledged the possibility of a situation that could force the company to sell Bitcoin. As PinkCrypto reported, Fung Lee indicated that there is a Bitcoin selling trigger related to mNAV and liquidity pressure.
During his participation in What Bitcoin Did, CEO Fung Lee explained the specific trigger that might force the company to sell Bitcoin:
First, the company's stock must trade below 1x mNAV, meaning that the company's market value falls below the value of its Bitcoin holdings.
Second, MicroStrategy must be unable to raise new capital through issuing stocks or bonds. This means that financial markets will be closed or too expensive to access.
Thus, the recent statement does not contradict Fung Lee's previous position but adds another layer of risk.
It explains that previously, selling Bitcoin was dependent on trading stocks under the net asset value adjusted and closing capital markets. Now, it indicates that in the event of an extreme collapse of 90%, the urgent matter would be debt servicing, which is likely to be addressed first through restructuring or new financing — not necessarily through selling Bitcoin.
Significant exposure to Bitcoin comes with substantial losses.
Strategi remains the largest institutional holder of Bitcoin in the world, announcing ownership of 713,502 btc as of early February 2026. The company acquired these holdings at a total cost of approximately $54.26 billion, according to fourth-quarter financial results.
However, the decline of Bitcoin in recent months of 2025 has had a significant impact on the balance sheet. The company reported unrealized losses in digital assets amounting to $17.4 billion for the quarter, and a net loss of $12.4 billion. This highlights the sensitivity of its financial performance to market fluctuations.
At the same time, Strategi continued to raise substantial capital. The company stated that it raised $25.3 billion in 2025, making it one of the largest equity issuers in the United States.
They also reported that they have built a reserve of $2.25 billion designed to cover nearly two and a half years of profit and interest obligations.
Executives argue that these measures enhance liquidity and provide flexibility, even during periods of market stress.
Bitcoin's volatility highlights the risks.
This disclosure comes amid increasing volatility in cryptocurrency markets. Bitcoin traded near $70,000 in early February before a series of declines extended to a low of $60,000 on February 6. This illustrates how quickly price movements can reshape expectations for treasury strategies heavily reliant on leverage.
Strategi's capital structure relies heavily on debt, preferred equity, and convertible instruments that have been used to accumulate Bitcoin over several years.
While this approach has doubled profits during bull markets, it also amplifies losses during downturns, attracting more scrutiny from investors and analysts.
However, the company's leadership insists that the long-term nature of much of its debt provides time to manage cycles. They say this reduces the risk of forced liquidations in the near term.
Saylor doubles down on his commitment to the long-term thesis.
Elsewhere, CEO Michael Saylor reaffirmed his conviction in Bitcoin despite recent losses, describing it as the "digital transformation of capital" and urging investors to "hold strong."
Saylor and other executives argue that Bitcoin remains the strongest form of money and that the company's long-term strategy is based on holding the asset indefinitely rather than trying to time market cycles.
The company is also expanding its efforts in financial engineering, including expanding digital credit tools and preferred equity offerings. According to management, this aims to reduce volatility and diversify funding sources while continuing to accumulate Bitcoin.
Investor division over the upcoming risks.
Market reaction to disclosures about earnings and the negative scenario has been mixed. Supporters argue that Strategi's massive Bitcoin reserves and its ability to issue equity and debt maturities over several years provide enough flexibility to weather even sharp downturns.
Critics see a prolonged bear market forcing the company to make tough decisions. Potential risks mentioned by investors include shareholder dilution, pressure on the capital structure, or the possibility of selling Bitcoin if funding conditions tighten.
Jacob King stated that the company is currently facing a massive loss of -$7.3 billion on its investments in Bitcoin.
Strategi currently appears committed to its high-conviction approach. However, by acknowledging that its Bitcoin reserves will only equate to its debts, the company clarified that even the most aggressive corporate strategies on Bitcoin have a theoretical breaking point, and this point is determined not only by market prices but also by the limits of leverage itself.
