Strategy (MSTR +1.64%) (formerly known as MicroStrategy) was a pioneer of the Bitcoin (BTC 2.01%) treasury business model. As its previous software businesses experienced declining performance, over the past five years, the company has instead prioritized cryptocurrency investments as its new growth driver.
Through this approach, Strategy has been able to outperform Bitcoin over the last five years -- with gains of 196% across the stretch, compared to Bitcoin's gains of 169%. However, Strategy's performance over the last year has been a very different story.
As of this writing, Bitcoin is trading roughly flat over the last year. Meanwhile, Strategy stock has lost more than half of its value. Is the company's slide poised to continue in 2026?
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Why Strategy's valuation collapse could continue
To understand what might come next for Strategy stock, it's important to understand how the company's crypto treasury model works -- and why it was previously able to drive huge gains for the stock.
NASDAQ: MSTR
Key Data Points
By issuing new shares and taking on debt, the company acquires funds that it then uses to buy Bitcoin. Thanks to the strong bull run for Bitcoin over the last five years, this helped Strategy stock post massive gains.
Using secondary stock offerings and borrowed money to fund Bitcoin purchases works well when the cryptocurrency's token price is on a rapid upswing. By creating and selling new shares to fund its purchases, Strategy is selling diluted stakes in the company, often at valuations that put a premium on the stock. With most of the company's market capitalization tied to the value of its Bitcoin holdings and the expectation that its crypto treasury approach can continue to drive growth, Strategy's valuation is closely tied to Bitcoin pricing trends.
Because Bitcoin has traded roughly flat over the last year, Strategy's financing moves have had a dilutive impact on shareholders and added debt without the corresponding stock gains that previously made its capital-raising tradeoffs a nonissue for shareholders. Because Strategy stock comes with outsized downside risk when Bitcoin underperforms, many shareholders have reduced their exposure to the stock over the last year.
If Bitcoin moves generally sideways, or even posts modest gains in 2026, Strategy stock is likely to get hit with another substantial round of sell-offs. But if the market-leading cryptocurrency slides substantially, the stock could crash well below current levels. Alternatively, Strategy stock could dramatically outperform Bitcoin if the token enjoys a strong rally.
While it's impossible to forecast with certainty where Bitcoin's valuation will go in 2026, I generally have a cautious outlook on the crypto market for the year. With that in mind, I don't see this as a great time to buy Strategy stock. If you're seeking exposure to Bitcoin, I would recommend buying the token directly.
