Key Points
Bitcoin's price is falling, leading Strategy to report huge losses on its Bitcoin treasury investments.
The company has raised tons of money, but now trades at a discount to its Bitcoin holdings.
If you want to get long Bitcoin, just buy the actual cryptocurrency instead.
- 10 stocks we like better than Strategy ›
Shares of Strategy (NASDAQ: MSTR) -- the company formerly known as MicroStrategy -- fell as much as 25.5% this week, according to data from S&P Global Market Intelligence. The Bitcoin treasury company is trading up and down wildly along with the price of Bitcoin. Its holdings now trade below their cost basis.
As of this writing on Friday, February 6th, at 1:00 PM EST, Strategy stock is down 11.2% this week and 71% from all-time highs. Here's why, and whether the stock is a buy today.
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Falling Bitcoin prices, liquidity concerns
Strategy runs a simple business: it raises money and buys Bitcoin. That's it. It is a leveraged operation that uses capital markets to acquire as much of the cryptocurrency as possible. In 2025 alone, it raised $25 billion, or 8% of total U.S. equity issuance last year.
It now holds 713,000 Bitcoin, or more than 3% of the 21 million coins that will ever exist. However, its cost basis on all these coins is $76,000, which is below the current price of approximately $70,000. This puts the entire investment strategy of the business into question.
Today, Strategy actually trades below the net asset value (NAV) of its Bitcoin holdings. However, it does have debt to service on its balance sheet, alongside dividend and interest income payment obligations. Investors are worried that if Bitcoin falls to a low enough price, Strategy will have to start unwinding its positions at a loss. This could trigger further selling in Bitcoin and, in turn, further losses. This could be detrimental to the stock price.
Image source: Getty Images.
Time to buy Strategy stock?
Historically, Strategy's business model worked by selling common stock at a premium to the company's book value and then buying Bitcoin with the proceeds. However, today this premium has turned into a discount, which means that if Strategy raises money through a common stock offering, it will actually dilute its Bitcoin per share, one of its favorite financial metrics.
As I said above, this puts into question the company's entire business model. If you are bullish on Bitcoin, it might be best to avoid buying Strategy stock and simply buy the actual cryptocurrency instead.
Should you buy stock in Strategy right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
