Strategy (NASDAQ: MSTR) stock is down a little over 2% after the company reported its fourth-quarter earnings following market close on Feb. 5. The report underscored a familiar theme for MSTR investors: quarterly results are now driven far more by Bitcoin accounting than by the company’s underlying software operations.
While Strategy continues to grow its analytics revenue at a steady, modest pace, the headline numbers remain volatile due to changes in the value of its massive Bitcoin holdings. This dynamic caused the report to look weak at a surface level, even as the company doubled down on its long-term Bitcoin-focused strategy.
Heading into earnings, analysts projected adjusted earnings per share (EPS) of $46.02, compared with an EPS loss of 3.03 in the prior year. Mainly due to realizing Bitcoin losses, Strategy missed that number by a massive margin, posting a loss of $42.93 for the quarter.
What Every Investor Should Understand About Strategy
Strategy is not a software company any more than GameStop Inc. (NYSE: GME) is a video game company. While its origin was in software, Strategy has since made a strategic pivot to be a Bitcoin treasury.
As such, it’s a leveraged play on Bitcoin that also generates some software revenue. That’s a critical point to understand, as will become clear later in this article.
The company has done an impressive job of stashing Bitcoin. At the end of 2025, Strategy owned 713,502 Bitcoin at a total cost of $54.26 billion, with an average cost of $76,052 per Bitcoin. The company owns approximately 3% of the world’s Bitcoin.
Strategy’s Debt-Funded Bitcoin Bet Raises Leverage and Liquidation Risk
However, it’s how Strategy bought its Bitcoin that is the larger issue. Simply put, the company financed its Bitcoin purchases by issuing convertible debt in the form of secured notes.
The takeaway for investors is that for Strategy, Bitcoin is the company’s largest asset by far, but it’s funded with debt. That’s called leverage.
If Bitcoin rises, the value of the BTC increases faster than the debt, magnifying gains for shareholders. However, ff Bitcoin falls, losses are also magnified. That's what’s happening now.
It gets worse. As of this writing, Bitcoin trades around $63,169 per Bitcoin. That's 16% below Strategy’s average purchase price.
Now remember that while Strategy does have a software business, it’s no longer the primary driver of the company’s valuation. Even if it was, the software space is the latest victim of the tech sector shakeout.
Plus, the recently adopted GENIUS Act has legitimized Treasury-backed stablecoins. Some analysts believe this weakens Bitcoin’s transactional use case and its positioning as a store of value.
That should lead investors to the elephant in the room. That is, could the company be forced to sell Bitcoin? According to Polymarket, the odds it will stand around 26%.
Strategy Stock Is Not for Every Investor
No matter how investors try to dress it up, to invest in Strategy is to invest in Bitcoin.
More than that, investors are making leveraged bets on Bitcoin. That makes for happy investors when the price of Bitcoin is going up, as it did for most of 2024.
But when Bitcoin drops, as it’s been doing since late 2025, MSTR stock will fall further. In this case, the stock is down nearly 58% in the last three months.
Of course, just as an investor doesn’t realize profit until he sells, the same can be said for losses. Investors who believe Bitcoin will recover and have the time to hold until then could have an unprecedented buying opportunity.
For now, analysts still have a consensus price target on MSTR stock of $417.38, which would be a 290% gain from its closing price on Feb. 5. However, betting on MSTR increasingly looks like gambling with the reality of the Bitcoin selloff. But that’s why they call it an asymmetric risk.
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