Every financial experiment eventually reaches its moment of reckoning, and that moment has arrived for Strategy Inc. – the company built around Michael Saylor’s grand vision of corporate Bitcoin accumulation. Once celebrated as the purest proxy for crypto exposure on Wall Street, the firm is now facing the harsher side of volatility, and retail investors who followed the narrative are discovering the real cost of high-leverage enthusiasm. At YourDailyAnalysis, we see in this episode a classic reminder: strategies built on perpetual upside tend to falter the moment the cycle turns.
Strategy’s stock has plunged more than 60% from its recent highs, forcing the company to reassure markets that it can withstand the downturn. Its newly announced $1.4 billion reserve – intended to secure dividend and interest payments – was meant to calm fears that further declines in Bitcoin could trigger forced sales of the firm’s holdings. Yet for many investors, the damage is already locked in. Leveraged ETFs tied to Strategy – notably MSTX, MSTU, and the newer MSTP – have collapsed by over 80% this year, wiping out roughly $1.5 billion in assets since October. What was marketed as an amplified way to bet on Bitcoin has instead become a painful demonstration of how leverage and volatility compound losses.
The issue goes far beyond Bitcoin’s decline. These ETFs are designed to deliver twice the daily movement of Strategy’s stock, which means that in choppy, whipsaw markets they accumulate losses even when the underlying asset ends flat. As we noted in YourDailyAnalysis, they perform spectacularly during rallies but become destructive the moment volatility overwhelms trend. The dynamic is intensified by Strategy’s own reliance on leverage: the company has spent years buying Bitcoin by issuing new common shares, diluting shareholders continuously to fuel its buying spree. During a downcycle, that dilution becomes a structural vulnerability.
A critical valuation metric now under scrutiny is mNAV – the ratio comparing the market value of Strategy to the worth of its Bitcoin holdings. That premium, once a major source of bullish sentiment, has nearly vanished. The metric has slid to roughly 1.15, and executives have admitted publicly that a drop toward 1.0 could potentially force the company to sell Bitcoin to meet payout obligations. At YourDailyAnalysis, we view this acknowledgment as a rare moment of transparency – and a sign that the firm’s model may not be built to endure prolonged stress.
The newly created reserve provides about 21 months of dividend and interest coverage, but importantly, the reserve itself was financed not from operating income but from equity sales. As soon as Strategy’s valuation premium eroded, the company pivoted from issuing common shares to more expensive preferred equity and other high-cost capital – a move that signals tightening conditions. It underscores that Strategy’s funding model now depends more on market confidence than on business fundamentals.
Meanwhile, the ETF ecosystem built around the stock is suffering its own implosion. Combined assets across MSTX, MSTU and MSTP have fallen from over $2.3 billion to about $830 million. And analysts at JPMorgan warn that Strategy may soon lose its place in major indices such as the Nasdaq 100 and MSCI USA – a shift that could trigger forced passive outflows worth billions. For a company that once flirted with S&P 500 inclusion, the reversal is stark.
The crypto market provides little relief. Despite elevated institutional participation and renewed political support under the Trump administration, Bitcoin has slid nearly 30% from its October peak. Mining stocks, altcoins and corporates holding token-heavy treasuries have also been hit hard. This broad weakness intensifies the pressure on Strategy, whose business is uniquely exposed to cryptocurrency sentiment.
Our assessment at YourDailyAnalysis is that the next 12 to 24 months will determine whether Strategy’s model can survive without a major rebound in Bitcoin. A return toward $100,000 would alleviate much of the stress; continued volatility or further declines could push the company into a position where selling reserves becomes unavoidable – a move that could send shockwaves across the crypto-equity landscape.
For investors, this moment calls for discipline rather than hope. We recommend closely monitoring mNAV levels, reassessing exposure to leveraged ETFs, and treating Strategy not as a long-term crypto investment but as a highly speculative instrument whose performance hinges on both Bitcoin’s trajectory and the company’s capital-raising choices. ETFs with embedded leverage are best viewed as short-term trading tools, not as vehicles for extended holding periods.
The story of Strategy is still unfolding, but it already stands as a cautionary tale: when narratives become larger than fundamentals, investors often find themselves bearing risks they never intended. And that is why we at Your Daily Analysis will continue to watch closely – to see whether this bold crypto experiment stabilizes or becomes another chapter in the market’s long history of speculative cycles.
