The "Number One Whale" Strategy suggests a pause in accumulation, is BTC facing a key turning point?

Written by: Ding Dong (@XiaMiPP)

Michael Saylor, the CEO of Strategy (formerly MicroStrategy), stated in a post last Sunday: "Some weeks you just need to HODL." The market interpreted this as a hint to pause Bitcoin purchases.

As the publicly listed company with the largest amount of Bitcoin holdings globally, Michael Saylor's consistent investment philosophy is "Bitcoin first". Investors have become accustomed to his "buy" being written into his DNA. Therefore, every pause in Strategy will touch the most sensitive nerve of the market, especially in the context of having increased BTC holdings for 13 consecutive weeks before.

The Weight of Bitcoin Treasury: How Strategy Influences the Market

As of July 8, the total Bitcoin holdings of Strategy have reached 597,000 BTC, accounting for 2.84% of the total supply, far ahead of other listed companies, and its holdings are even 2.3 times that of the combined holdings of the top 100 listed companies (excluding Strategy).

According to the information in the 8-K filing submitted to the U.S. SEC by Strategy, as of June 30, the value of Strategy's (MSTR.O) digital assets was $64.36 billion, with an average cost of $70,982 per coin, where the fair value appreciation of Bitcoin for the second quarter of 2025 amounted to $14 billion.

In other words, Strategy is not only a big whale in Bitcoin but also a lever for the market's price sentiment. Every move of Strategy can trigger sensitive points in the market. Looking at several pauses in purchasing since 2025, they have almost all indicated short-term corrections in the market. Will this time be an exception?

Strategy pauses purchasing and correlation with Bitcoin trends

Capital Raising Flywheel: The Capital Game of Preferred Stock

Strategy originally started as a company focused on enterprise analytics software, but since 2020, its core strategy has shifted to using Bitcoin as a primary reserve asset, aiming to hedge against inflation and achieve asset appreciation. Strategy has also gained significant fame due to its large-scale investments in Bitcoin.

To continuously purchase Bitcoin, Strategy requires a significant amount of capital. Therefore, it has chosen to raise funds by issuing preferred stocks. Since February 2025, Strategy has issued three types of preferred stocks, namely STRF, STRK, and STRD, corresponding to different yield mechanisms and risk priorities:

STRF: 10% cumulative dividend, highest priority. If not paid, the dividend will compound at an additional rate of 1% per year, up to a maximum of 18%.

STRK: 8% cumulative dividends with attached convertible options.

STRD: 10% non-cumulative dividend, low priority, more widely distributed to the general market.

The core design of this structure is to allow the Strategy to continuously leverage new capital inflows without severely diluting the equity of common shareholders, thereby providing ammunition for its ongoing Bitcoin purchases and maintaining the closed loop of "issue shares - buy coins - increase stock price."

From a market performance perspective, MicroStrategy (MSTR) has significantly outperformed Bitcoin itself, especially driven by the recent "crypto stock" craze. STRK and STRF, as earlier issued preferred stocks, have also shown excellent market performance, while the later issued STRD has demonstrated impressive potential. In terms of price trends, STRK and STRF have particularly stood out recently, even greatly surpassing the stock performance of MSTR.

It is noteworthy that in March, this preferred stock issuance plan attracted internal executives to personally get involved. According to documents disclosed by the U.S. Securities and Exchange Commission, several insiders from Strategy purchased its recently launched preferred stock, including the company’s CEO, CFO, and other executives. Specifically, CEO Phong Le bought 6,000 preferred shares at a price of $85, CFO Andrew Kang purchased 1,500 shares, and General Counsel Wei-Ming Shao bought 500 shares. This "self-purchase" behavior serves as a signal and conveys the company's strong expectations for future returns.

On June 5, Strategy announced the public issuance of 11,764,700 shares of 10.00% Series A perpetual Stride preferred stock, with an issue price of $85 per share, and the delivery is expected to be completed on June 10, raising approximately $980 million. Today, Strategy announced that it has signed a new sales agreement. Under this agreement, it plans to issue STRD stock to raise $4.2 billion, and it is expected to prepare "on-demand, phased" continuous financing according to the ATM plan. This flywheel is spinning faster and faster.

The other side of leverage: a growth engine, but also a risk trigger?

According to the financial report for the first quarter of 2025 released by Strategy on May 1, it shows that it has raised nearly $10 billion through the ATM issuance of preferred shares, convertible bonds, and common stock, almost all of which has been invested in Bitcoin. This high-leverage operation amplifies the unrealized gains from the rise in Bitcoin but also increases the cash flow burden, especially with the annual interest expenses of 8% to 10% brought by the preferred shares.

As of now, MSTR has a market capitalization of approximately $112.9 billion, with a company valuation around $120 billion, corresponding to a net asset multiple of 1.7. Although it is still within a reasonable range, the elasticity of this line relies on two pivot points: first, the continued strength of Bitcoin prices, and second, the smooth and stable external financing environment.

From the revenue perspective, the company's own "blood-making" ability is weak. According to data provided by @0x ChainMind, the company's software business revenue in 2024 is only $463 million, setting a record low since 2010.

According to the financial report for Q1, the company's main business had a total revenue of 111.1 million USD in the first quarter of 2025, a decrease of 3.6% compared to 115.2 million USD in Q1 2024. However, subscription service revenue reached 37.1 million USD, an increase of 61.6% year-on-year, indicating a successful transformation towards cloud services and subscription models, which stands out as a highlight in revenue. If the old impairment model is still used for calculations, the operating expenses and losses are approximately around 190 million USD (there is controversy here, and Strategy is also facing a class-action lawsuit), with cash reserves at 60.3 million USD. If we speculate based on this data, the operating expenses can barely be covered. If the company wants to maintain operations and pay the preferred stock annual interest of 8% - 10% (annual expenditure can reach up to 300 to 500 million USD), it must rely on "continuous financing" to sustain the flywheel operation.

The "explosion" behind the report: 5.9 billion in floating losses, a class action lawsuit is on the way.

The reason Strategy is facing a class action lawsuit is its first adoption of the FASB new accounting standards (ASU 2023-08) in the first quarter of 2025. According to the new regulations, companies must measure cryptocurrency assets at fair value, rather than recognizing impairment only when there is a decline in value. This means that any fluctuations in Bitcoin prices will be reflected in the income statement in real-time and directly.

As a result, in Q1, Strategy disclosed an unrealized loss of 5.9 billion USD, directly causing MSTR's stock price to plummet by 8% in that quarter.

Worse still, the company is accused of failing to timely and comprehensively disclose these floating loss risks. The renowned New York law firm Pomerantz LLP promptly initiated a class action lawsuit against Strategy in the Eastern District Court of Virginia, alleging that it made "false and misleading statements" between April 2024 and April 2025, suspected of violating federal securities laws. The case is currently progressing, and investors can apply to join the class action lawsuit by July 15. Strategy stated that it will actively respond, but did not predict the outcome of the case.

This means that the price of Bitcoin not only determines the asset value of the Strategy, but is also determining its legal risks, financing capabilities, and investor confidence.

The voice of the market

Michael Saylor posted that Strategy has developed a BTC credit model that takes into account loan terms, collateral coverage, BTC price, volatility, and annualized yield expectations, in order to generate statistical data on Bitcoin risk and credit spreads. Strategy is promoting the digital transformation of the credit market through its STRK, STRF, and STRD, which also means that Strategy's path is no longer just about buying Bitcoin; it is more like building a closed-loop system around the capitalization and financialization of BTC.

A report by the venture capital firm Breed indicates that Strategy may become a long-term survivor of the crypto financial model due to its scale, positions, and anti-cyclical capabilities, with a 91% probability of being included in the S&P 500 Index by the second quarter of 2025.

But not everyone is so optimistic. Some analysts point out that this flywheel operates smoothly in a bull market, but once it enters a bear market, its debt structure, preferred stock dividends, and cash flow stability will be severely tested.

On July 1st, TD Cowen reiterated its "buy" rating for Strategy in a research report and maintained its target price of $590 per share. It stated that, despite the risks, the premium of Strategy's stock price relative to its net asset value (NAV) of held Bitcoin (BTC) is reasonable. The agency noted that Strategy's "equity-to-BTC loop" model allows it to use its stock issuance revenue to purchase more Bitcoin, thereby driving higher stock prices and further Bitcoin purchases, creating a positive feedback loop.

According to the current data, Strategy's short-term cash flow can still "barely maintain," and its Bitcoin holdings are the absolute mainstay on the company's balance sheet. But this is also its biggest risk: its prosperity is almost built on the assumption that BTC prices remain stable or rise. In a sense, Strategy is no longer a traditional technology company; it resembles a "Bitcoin high-leverage asset management platform" wrapped in software.