By David Pan and Melos Ambaye

(Bloomberg) -- Bitcoin’s plunge below $65,000 is intensifying the crisis rocking the digital-asset complex — and few companies are more exposed than Michael Saylor’s Strategy Inc.

In an earnings announcement Thursday, the Bitcoin-hoarding company confirmed a net loss of $12.4 billion for the fourth quarter, driven by the mark-to-market decline in its vast holdings. That pain deepened this week, as fresh market turmoil pushed the firm’s Bitcoin stash below its cumulative cost basis for the first time since 2023 — and erased the token’s post-election gains.

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The upshot: Saylor’s financial experiment is coming undone.

Bitcoin Crashes Below $70,000 as Collapse Continues

The former enterprise software firm had long defied gravity by turning its equity premium into a token-acquisition machine. At its peak, Strategy shares traded so far above the value of its holdings that the company could issue new stock, buy more Bitcoin, and repeat the cycle. But with that premium now gone — and capital markets tightening — the model has stalled.

No new equity raise or debt issuance was announced. And in a departure from the pattern that has largely defined the company since 2020, Strategy did not offer a fresh vehicle or vision to finance additional purchases. That, combined with Saylor’s more defensive posture of late, marks a sharp break from prior quarters, when each selloff brought a new round of bravado and capital-financing taps.

Saylor, the co-founder and executive chairman, has said the company faces no margin calls and has $2.25 billion in cash, enough to cover interest and distributions for more than two years. But with Bitcoin trading firmly below the firm’s $76,052 cost basis, pressure is building.

Strategy reiterated Thursday that it doesn’t expect to generate earnings and profits in the current year or the foreseeable future. Based on these expectations, the firm expects that any distributions to holders of its perpetual preferred shares are tax free for now.

“Some of you bought Bitcoin or MSTR in the last year, this is your first downturn, my advice is to hold on,” Strategy Chief Executive Officer Phong Le said during a presentation after the results were released. Le’s attempt at reassurance was met with outrage from anonymous posters in a comments section that ran during the livestream.

Photographer: Ronda Churchill/Bloomberg

“At this point, the focus is on Strategy’s intentions regarding the raising of capital to fuel its Bitcoin purchases in the face of challenging market conditions,” said Mark Palmer, an analyst at Benchmark Co., which has a “buy” rating on the common shares. “In this environment, the company is looking for its STRC perpetual preferred stock to be a driver of that effort.”

Strategy holds over 713,000 Bitcoin, valued at about $46 billion, according to its website. In late January, it added another $75.3 million of Bitcoin — a signal that the accumulation drive remains, at least formally, intact.

But Michael Burry rekindled scrutiny of Strategy this week, warning that Bitcoin’s drop could trigger a “death spiral” among corporate holders and leave Saylor’s firm billions underwater. His remarks revived a long-running critique echoed by short-sellers like Jim Chanos, who flagged Strategy’s reliance on non-earning assets and speculative leverage well before the recent breakdown.

For much of the past four years, Strategy operated as a high-beta proxy for Bitcoin exposure. Its shares surged more than 3,500% between 2020 and 2024, outperforming major indexes and attracting both speculators and skeptics. The firm’s rise as a high-octane Bitcoin proxy — first through equity sales, then debt — made it a lightning rod for critiques of speculative leverage and corporate crypto exposure.

The engine was always on shaky ground. Spot Bitcoin ETFs have made exposure cheaper and cleaner, eroding Strategy’s niche. With token volatility rising and digital-asset liquidity fading, many of the same investors who once chased leveraged upside are now pulling back.

During  the presentation, Saylor dismissed concerns about the threat of quantum computing to Bitcoin, reiterating that it was “FUD,” short for fear, uncertainty and doubt. The supposed threat to Bitcoin centers on the potential for quantum algorithms to break the cryptographic code that prove ownership and secure the network.

Saylor has been managing expectations more overtly. His statement on profitability functions as a subtle repositioning. The underlying message: Strategy shouldn’t be judged by short-term market swings. By framing profitability as a distant prospect, Saylor is inviting investors to treat the company less like a software firm or trading proxy — and more like a long-duration Bitcoin trust, anchored to the token’s trajectory rather than quarterly earnings.

Investors beg to differ. The stock is down almost 80% since reaching a record high in November 2024.

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