Bitcoin is still in the middle of a bear market. It's trading 49% off its record (as of July 28).
Consequently, Strategy (MSTR -2.94%) is also feeling the pain, with shares 80% below their peak. But the management team gave investors some hope, helping manage what has been a difficult period.
Phong Le, who has been the company's chief executive officer since 2022, said that the most valuable cryptocurrency's price could drop all the way to $8,000-$10,000, about an 86% decline, before causing potential stress on the balance sheet.
Here's why he's right.
Image source: The Motley Fool.
The financial math is clear
Let's say that Bitcoin did decline 86% from its current price of around $63,000 to $9,000. Strategy shares would undoubtedly also take a huge hit. On the way down, common equity investors would continue to lose confidence in the business. It might be hard to envision such a pessimistic scenario, especially given how dire things seem these days.
Le claims that Strategy could manage this turbulent period. The math that supports his view is straightforward. At a price of $9,000, the company's Bitcoin stack of 843,775 units would be worth $7.6 billion. That's more than the notional convertible debt balance of $6.7 billion.
Strategy also has a U.S. dollar reserve of nearly $3.8 billion. This cash balance alone would cover 25 months of interest and dividend payments. And its convertible debt has maturities ranging from 2028 to 2032. If Bitcoin's price doesn't recover, Strategy could start selling off the digital asset to repay its creditors.
The worst-case scenario would be Bitcoin's price staying under $10,000 for several months or years. This seems highly unlikely. The company would have to try to raise equity capital at extremely dilutive terms while waiting for the crypto's price to bounce back.
NASDAQ: MSTR
Key Data Points
Is the business model broken?
What Strategy is doing is completely new in the business world. The leadership team conducts various capital markets activities to raise fiat currency, which is constantly losing value, and funnel it into Bitcoin, which is a fixed-supply digital asset.
At the base level, it starts with an unwavering belief in the cryptocurrency's long-term potential. Furthermore, Strategy has to implement stringent risk management practices to navigate unfavorable market conditions, as has been the case in 2026.
The business model isn't broken. It's been a terrible year for Bitcoin. However, Strategy has still been able to purchase over 171,000 units of the digital asset so far in 2026.
And the company has serviced its obligations with no hiccups. Until Strategy stops paying dividends and interest, the business model is operating as it should.
