MicroStrategy: The Life and Death Game of the World's Largest Bitcoin Whale

Author: Clow

670,000 Bitcoin, approximately 3.2% of the total global supply.

This is the amount of Bitcoin held by MicroStrategy (now renamed Strategy Inc.) as of mid-December 2025. As the world’s first publicly listed company to adopt Bitcoin as its primary reserve asset, this former business intelligence software provider has completely transformed into an “operational enterprise specializing in structured financial design around Bitcoin.”

The renaming is not just a brand change; it is a definitive declaration that its corporate strategy has fully shifted toward “Bitcoin-based” fundamentals.

However, entering Q4 2025, with increased market volatility and potential changes in index provider rules, this model, which founder Michael Saylor calls a “revolutionary financial innovation,” is facing its most severe test since its inception in 2020.

So, where does MicroStrategy’s money come from? Can its business model sustain itself? Where are the biggest risks?

From Software Company to “Bitcoin Bank”

In 2025, MicroStrategy officially renamed itself Strategy Inc., marking a complete transformation of its identity.

The core logic of this company is straightforward: leveraging the premium of its stock relative to the net asset value of its Bitcoin holdings, through continuous financing to increase Bitcoin accumulation, thereby achieving a steady growth in Bitcoin holdings per share.

In plain language: As long as the market is willing to assign a higher valuation to MSTR stock than the value of its Bitcoin holdings, the company can issue new shares to buy more Bitcoin, increasing the Bitcoin per share for existing shareholders rather than diluting their holdings.

Once this “flywheel effect” is activated, it creates positive feedback: stock price rises → issuing shares to buy Bitcoin → Bitcoin holdings increase → stock price continues to rise.

But this flywheel relies on a crucial premise: the stock price must remain consistently above the net asset value of Bitcoin. If this premium disappears, the entire model will come to a halt.

Where does the money come from? The “Three Main Tools” of Financing

The outside world is curious about the sources of funds behind MicroStrategy’s continuous Bitcoin purchases. By analyzing the company’s filings with the U.S. Securities and Exchange Commission (SEC), specifically the 8-K reports, it becomes clear that its financing methods have evolved from early single convertible bonds to a diversified capital matrix.

First Tool: ATM Program — The Money Printer that Captures Premium

MicroStrategy’s core funding source is its At-the-Market (ATM) offering program for its Class A common stock (MSTR).

The logic is simple: When MSTR’s trading price exceeds the net value of its Bitcoin holdings, the company sells new shares to the market and uses the proceeds to buy Bitcoin.

Between December 8 and December 14, 2025, the company sold over 4.7 million MSTR shares, netting approximately $888.2 million.

The appeal of this financing method is that: as long as the stock price remains above Bitcoin’s net value, each issuance is “value-enhancing” for existing shareholders rather than dilutive.

Second Tool: Perpetual Preferred Stock Matrix

In 2025, MicroStrategy took a significant step in financial innovation by launching a series of perpetual preferred stocks aimed at attracting investors with different risk appetites.

In just one week in December, these preferred stocks raised $82.2 million from STRD.

These preferred stocks are typically structured as “capital return-type” dividends, which are tax-efficient for investors because they allow deferral of tax obligations for at least ten years.

Third Tool: “42/42 Plan” — An $84 Billion Ambition

MicroStrategy is currently executing its ambitious “42/42 Plan.”

This plan aims to raise $42 billion through equity issuance and another $42 billion via fixed-income securities over three years from 2025 to 2027, totaling $84 billion, all dedicated to Bitcoin purchases.

This plan is an upgrade of the previous “21/21 Plan,” reflecting management’s extreme confidence in their ability to absorb securities in the capital markets. Such large-scale capital operations effectively turn MicroStrategy into a leveraged Bitcoin exposure fund, but with the operational shell of a traditional company, providing it with greater financing flexibility.

The Truth Behind the “Selling Bitcoin” Rumors

Recently, rumors circulated that MicroStrategy might be selling Bitcoin, but these claims are unfounded when examined against financial data and on-chain evidence.

In mid-November and early December 2025, on-chain analytics tools like ArkhamIntelligence observed large-scale asset transfers from MicroStrategy-controlled wallets. Data showed approximately 43,415 Bitcoin (worth about $4.26 billion) moved from known addresses to over 100 new addresses. This sparked panic on social media, causing Bitcoin’s price to briefly dip below $95,000.

However, subsequent professional audits and management clarifications indicated that this was not a sale but normal “custodian and wallet rotation.” To reduce reliance on a single custodian and enhance security, MicroStrategy diversified its assets from traditional platforms like Coinbase Custody to more defensive addresses. Arkham’s analysis suggests such operations are typically driven by security needs for address refreshes, not asset liquidation.

MicroStrategy Executive Chairman Michael Saylor has repeatedly denied these rumors publicly, and in December, he explicitly stated in tweets and CNBC interviews: “We are buying, and we are buying quite heavily.”

In fact, during the second week of December, the company added 10,645 Bitcoin at an average price of $92,098 per Bitcoin, directly contradicting the selling speculation.

Additionally, the recent establishment of a $1.44 billion USD Reserve further demonstrates that the company does not need to liquidate Bitcoin to pay dividends or debt interest, as this reserve can cover at least 21 months of expenses.

The Overlooked Software Business

While Bitcoin trading dominates public discourse, MicroStrategy’s software business remains a vital foundation for maintaining its listed status and covering daily expenses.

In Q3 2025, total software revenue reached $128.7 million, a 10.9% year-over-year increase, surpassing market expectations.

Although subscription revenue grew significantly, ongoing investments in AI R&D and cloud infrastructure meant that this segment did not generate positive operating cash flow in the first half of 2025. In Q3, free cash flow was negative $45.61 million, indicating the company is still operating at a loss, relying on external financing to continue accumulating Bitcoin.

Starting January 1, 2025, MicroStrategy adopted ASU 2023-08, requiring Bitcoin holdings to be revalued at fair value, with changes recognized in current net income. This change has introduced significant volatility into the company’s reported earnings. In Q3 2025, due to Bitcoin’s price increase, the company recorded an unrealized gain of $3.89 billion, resulting in a quarterly net profit of $2.8 billion.

The Three Damocles Swords Hanging Overhead

Although MicroStrategy has mitigated short-term forced liquidation risks through complex financial engineering, it still faces several systemic risks that could undermine its foundation.

Risk One: MSCI Index Removal

The most immediate risk comes from MSCI’s review process.

MSCI has initiated a formal consultation proposing to reclassify companies with digital assets exceeding 50% of total assets as “investment tools” rather than “operating companies.” Given that Bitcoin holdings constitute the majority of MicroStrategy’s assets, if this rule passes, MicroStrategy will be excluded from the MSCI Global Standard Index (GIMI).

Such exclusion could force passive funds to sell between $2.8 billion and $8.8 billion worth of stock. This large-scale forced selling would likely depress its stock price and compress the NAV premium of MSTR. If the premium disappears or turns into a discount, the “flywheel” of issuing shares to buy Bitcoin would grind to a halt.

Risk Two: NAV Premium Compression and Financing Freeze

MicroStrategy’s entire accumulation strategy depends on the market’s willingness to pay a premium over its net asset value.

By the end of 2025, this premium has shown high volatility. In early December, due to concerns over index removal, MSTR traded at an 11% discount to the value of its Bitcoin holdings.

When the stock trades at a discount, any new equity financing dilutes existing shareholders’ Bitcoin per share, forcing the company to halt asset accumulation and raising doubts among creditors about asset integrity. MicroStrategy temporarily suspended its ATM program in September 2025, reflecting management’s sensitivity to valuation multiples.

Risk Three: Debt Pressure and Theoretical Liquidation Price

As of the end of Q3 2025, MicroStrategy’s total debt was approximately $8.24 billion, with annual interest payments of about $36.8 million, and preferred dividends totaling $638.7 million annually.

While its convertible bonds do not include Bitcoin collateral clauses—reducing direct “margin call” risks during market downturns—extreme drops in Bitcoin’s price could still threaten its debt repayment capacity.

Summary

MicroStrategy’s situation at the end of 2025 vividly illustrates the opportunities and challenges faced by a company attempting to redefine its financial boundaries.

Its continued intention to accumulate Bitcoin remains unchanged, and with a $1.44 billion USD reserve, it has built a defensive barrier against potential liquidity crunches.

However, the greatest risk to MicroStrategy does not stem from Bitcoin’s price volatility itself but from its links to the traditional financial system—namely, its index status and NAV premium.

If institutions like MSCI decide to exclude it from traditional equity indices, MicroStrategy will need to find ways to demonstrate to investors that it remains a “Bitcoin-backed structured financing platform” capable of growth even outside passive index flows.

Whether the “42/42 Plan” can proceed as scheduled depends on its ability to continue creating attractive yield products for institutional investors amid the ongoing financialization of Bitcoin, while maintaining at least minimal financial dignity during the pain of software cloud transformation.

This is not just an experiment by MicroStrategy but a microcosm of the entire crypto industry’s integration with traditional finance.

In this unprecedented high-stakes gamble, the only certainty is: No one knows how this story will end.