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

Written by: Clow

670,000 Bitcoins, accounting for approximately 3.2% of the global total 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 traded company to make Bitcoin its primary reserve asset, this former business intelligence software provider has completely transformed into an “operating company that designs structured financial products for Bitcoin.”

Renaming is not just a change at the brand level, but a complete shift in the corporate strategy, an ultimate declaration of “Bitcoin Standard.”

However, entering the fourth quarter of 2025, as market volatility intensifies and potential changes in the rules of index compilation organizations emerge, this model, referred to by founder Michael Saylor as a “revolutionary financial innovation,” is facing the most severe test since its launch in 2020.

So, where does MicroStrategy's money actually come from? Can its business model be sustained? What are the biggest risks?

01 From Software Company to “Bitcoin Bank”

In 2025, MicroStrategy officially changed its name to Strategy Inc., marking a complete transformation of its identity.

The core logic of this company is not complicated: by utilizing the premium of its stock relative to the net asset value of Bitcoin, it continuously finances to increase its Bitcoin holdings, thereby achieving a continuous growth in the amount of Bitcoin held per share.

In plain terms: as long as the market is willing to give MSTR stock a higher valuation than the Bitcoin it holds, the company can issue new shares to buy more Bitcoin, allowing each existing shareholder to have an increasing amount of Bitcoin instead of a decreasing one.

Once this “flywheel effect” is activated, it will create a positive feedback loop: stock price rises → issuing shares to buy coins → increase in BTC holdings → stock price continues to rise.

But this flywheel also has a fatal premise: the stock price must remain consistently above the net value of Bitcoin. Once this premium disappears, the entire model will come to a sudden halt.

02 Where does the money come from? Financing “Three Axes”

The outside world is curious about the funding sources for MicroStrategy's continued purchases of Bitcoin. By analyzing the 8-K filings submitted by the company to the U.S. Securities and Exchange Commission (SEC), it is clear that its financing model has evolved from an early single convertible bond to a diversified capital matrix.

First Axe: ATM Program - The Money Printer Capturing Premiums

The core source of funds for MicroStrategy is its At-the-Market ™ program for the issuance of Class A common stock (MSTR) at market price.

The operational logic is very simple: when the trading price of MSTR stock is higher than the net value of the Bitcoin it holds, the company sells new shares to the market and uses the cash obtained to purchase Bitcoin.

During the week from December 8 to December 14, 2025, the company generated approximately $888.2 million in net revenue by selling over 4.7 million shares of MSTR stock.

The charm of this financing method lies in the fact that as long as the stock price is higher than the net value of Bitcoin, each new issuance is 'enriching' rather than dilutive for existing shareholders.

Second Axe: Perpetual Preferred Stock Matrix

In 2025, MicroStrategy took an important step in capital tool innovation by launching a series of perpetual preferred shares to attract investors with different risk appetites.

During the single week in December, these preferred shares received $82.2 million from STRD.

These preferred shares are typically structured as “capital return type” dividends, which are attractive to investors from a tax perspective because they allow for the deferral of tax obligations for at least ten years.

Third Axe: “42/42 Plan” - Ambition of 84 Billion Dollars

MicroStrategy is currently in the execution phase of its ambitious “42/42 plan”.

The plan aims to raise $42 billion through equity issuance and $42 billion through fixed income securities over the three years from 2025 to 2027, totaling $84 billion, all for the purpose of purchasing Bitcoin.

This plan is an upgraded version of the previous “21/21 Plan,” reflecting the management's extreme confidence in the capital market's ability to absorb its securities. This large-scale capital operation effectively turns MicroStrategy into a closed-end fund with leveraged exposure to Bitcoin, but the shell of its operating company gives it financing flexibility that traditional funds do not possess.

03 “Selling Coins” The Truth Behind the Rumor

Recently, there have been rumors in the market that MicroStrategy might sell its Bitcoin, but this seems untenable in light of financial data and on-chain evidence.

In mid-November and early December 2025, on-chain data monitoring tools (such as Arkham Intelligence) observed a large-scale asset transfer from wallets controlled by MicroStrategy. The data showed that approximately 43,415 bitcoins (worth about $4.26 billion) were transferred from known addresses to more than 100 new addresses. This triggered panic on social media, causing the price of Bitcoin to briefly drop below $95,000.

However, subsequent professional audits and management clarifications indicate that this is not a reduction in holdings, but rather a normal “custodian and wallet rotation”. MicroStrategy is diversifying its assets from traditional platforms like Coinbase Custody to more defensive addresses in order to reduce the credit risk associated with a single custodian and enhance security. Arkham analysis points out that such operations typically involve the security needs of address refreshing, rather than asset liquidation.

MicroStrategy Executive Chairman Michael Saylor has repeatedly publicly refuted rumors and clearly stated in December's Twitter and CNBC interviews: “We are buying, and the scale of our purchases is quite large.”

In fact, the company added 10,645 Bitcoins in the second week of December at an average price of $92,098 each, directly disproving the speculation of selling coins.

In addition, the company's recently established $1.44 billion USD Reserve further proves that it does not need to liquidate Bitcoin to pay dividends or interest on debts, as this reserve can cover at least 21 months of financial expenditures.

04 Neglected Software Business

Despite Bitcoin trading capturing the public's attention, MicroStrategy's software business remains an important foundation for maintaining its status as a publicly traded company and covering daily financial expenses.

In the third quarter of 2025, the total revenue from the software business was $128.7 million, a year-on-year increase of 10.9%, exceeding market expectations.

Although subscription revenue has grown significantly, the business did not generate positive operating cash flow in the first six months of 2025 due to the company's ongoing investments in AI research and development and cloud infrastructure. The free cash flow for Q3 was negative $45.61 million, indicating that the company is still operating at a loss, and its continued accumulation of Bitcoin relies entirely on external financing.

Starting from January 1, 2025, MicroStrategy adopted the ASU 2023-08 standard, requiring the revaluation of Bitcoin holdings at fair value, with changes recorded in the current net profit. This change has made the company's reported profits highly volatile. In Q3 2025, due to the rise in Bitcoin prices, the company recorded an unrealized gain of $3.89 billion, resulting in a quarterly net profit of $2.8 billion.

05 The Three Swords of Damocles Hanging Over the Head

Despite MicroStrategy's complex financial design reducing the risk of short-term forced liquidation, it still faces several systemic risks in the future that could shake its foundations.

Risk One: MSCI Index Exclusion

The most direct risk currently facing MicroStrategy comes from the review by the index compiler MSCI.

MSCI has initiated a formal consultation proposing to reclassify companies with digital assets accounting for more than 50% of total assets as “investment vehicles” rather than “operating companies.” Since Bitcoin holdings constitute a significant majority of MicroStrategy's assets, if this rule is passed, MicroStrategy will be removed from the MSCI Global Standard Index (GIMI).

This exclusion may force passive funds to sell stocks valued at $2.8 billion to $8.8 billion. This large-scale forced selling will directly suppress their stock prices, thereby compressing MSTR's NAV premium. If the NAV premium disappears or even turns into a discount, its “flywheel” of buying Bitcoin through issuing new shares will come to a complete halt.

Risk Two: NAV Premium Compression and Financing Stagnation

The entire accumulation logic of MicroStrategy is based on the market's willingness to pay a premium above its net asset value.

By the end of 2025, this premium has shown significant instability. At the beginning of December, due to market concerns over index exclusions, MSTR traded at a discount level of 11% of its Bitcoin holdings.

When stocks are trading at a discount, any new equity financing will dilute existing shareholders' per-share Bitcoin holdings, which will force the company to halt asset accumulation and may even face creditors questioning the integrity of the assets. MicroStrategy had first suspended its ATM program in September 2025, reflecting the management's high sensitivity to valuation multiples.

Risk Three: Debt Pressure and Theoretical Liquidation Price

As of the end of Q3 2025, MicroStrategy's total debt is approximately $8.24 billion, with an annual interest payment of about $36.8 million, while the preferred stock dividends amount to as much as $638.7 million per year.

Although its convertible bonds do not include Bitcoin collateral clauses, which reduces the direct “liquidation” risk caused by market downturns, if the price of Bitcoin experiences a drastic drop, the company's ability to repay its debts will be put to the test.

06 Summary

MicroStrategy's situation at the end of 2025 vividly showcases the opportunities and challenges a company faces when attempting to redefine its financial boundaries.

Its intention to continue increasing its holdings has not changed, and by establishing a $1.44 billion dollar reserve, the company has built a defensive wall against a potential liquidity winter.

However, the biggest risk for MicroStrategy does not come from the fluctuations in Bitcoin prices themselves, but from its link to the traditional financial system - namely, its index status and NAV premium.

If institutions like MSCI ultimately decide to exclude it from the traditional equity category, MicroStrategy must find a way to demonstrate to investors that it still has growth potential as a “Bitcoin-backed structured finance platform” independent of passive inflows from indices.

The future of the “42/42 plan” will depend on whether it can continuously create yield products attractive to institutional investors during the financialization process of Bitcoin, while maintaining at least a minimum level of financial dignity amid the growing pains of the software business cloud transformation.

This is not just an experiment by MicroStrategy, but a microcosm of the integration process between the entire crypto industry and the traditional financial system.

In this unprecedented gamble, the only certainty is that no one knows the ending of this story.