Strategy Stress Test: Bitcoin Could Decline 11.4% Annually

Strategy says its balance sheet can endure prolonged Bitcoin declines

Strategy published a scenario showing its capital structure could sustain a steady multi-year fall in Bitcoin while still meeting interest and preferred stock dividend obligations. In a July 24 post on X, the company said Bitcoin could lose 11.4% per year for 5.8 consecutive years without pushing its internally calculated BTC Rating below a 1.0x coverage threshold. The announcement arrived as Bitcoin traded near $64,463 and Strategy shares (MSTR) closed at $91.67 on July 24.

What the BTC Floor ARR stress test measures

Definition and methodology

Strategy’s stress test centers on a metric the company calls BTC Floor ARR. The firm defines this as the minimum constant annual Bitcoin return required to preserve a 1.0x coverage of net debt plus preferred stock over the weighted duration of its credit structure. The calculation incorporates scheduled interest expenses and preferred dividend payouts and is intended to illustrate balance-sheet coverage under a steady decline in BTC price.

Key caveats

This BTC Rating is an internal, illustrative gauge — not a formal credit rating from an independent agency. Strategy emphasizes the metric is meant to demonstrate coverage under a modeled decline rather than predict Bitcoin’s path or prove the company can meet every obligation in all market environments. It does not directly measure liquidity, solvency, or full financial performance and excludes certain risks such as potential cross-defaults under debt agreements.

How Strategy’s cash reserve and Bitcoin holdings support the model

As of July 19, Strategy reported holding 843,775 BTC, acquired at an aggregate cost near $63.69 billion and an average price of about $75,476 per BTC. The company also disclosed a U.S. dollar cash reserve of $3.225 billion after raising roughly $263.5 million through common-stock sales.

Annual interest and preferred dividend obligations are approximately $1.7 billion under the company’s current capital structure. At that burn rate, the cash reserve alone covers less than two years of obligations, meaning Strategy would ultimately need new financing, authorised Bitcoin sales, or other capital actions to sustain payouts beyond that period without relying on BTC price recovery.

Digital Credit Capital Framework and authorised actions

Sale authorisations and dividend adjustments

In June, Strategy rolled out a Digital Credit Capital Framework that authorises up to $1.25 billion of Bitcoin sales to build or replenish the cash reserve. The framework also permits selected BTC sales to fund preferred dividends, interest and approved security repurchases. Strategy increased the STRC preferred dividend rate to 12% and approved separate $1 billion buyback programmes for both common and preferred securities.

Recent sales and use of proceeds

Between June 29 and July 5, Strategy sold 3,588 BTC for approximately $216 million, using those proceeds to pay preferred distributions and replenish its cash buffer. The transactions reduced total BTC holdings from 847,363 to 843,775 coins.

Assumptions, limitations and refinancing risks

Strategy’s model includes several material assumptions that may not hold under severe market stress. For example, the calculation uses the notional value of preferred stock even though some securities may carry liquidation preferences above that figure. It also assumes the company can refinance maturing debt on broadly similar terms without repaying principal — an outcome that may be unrealistic in a liquidity squeeze or a steep market correction.

Preferred dividend payouts require board approval and the company can adjust STRC’s variable rate monthly. Strategy does not guarantee cash distributions; it can choose to issue shares, sell Bitcoin, reduce distributions where contractually permitted, or restructure obligations if funding deteriorates. Therefore, a 1.0x BTC Rating does not eliminate refinancing risk, dilution risk, or execution risk.

Market context: Bitcoin price, MSTR and market premium

Bitcoin traded around $64,463 on July 26 — about 49% below its October 2025 peak near $126,000. Strategy’s share price (MSTR) was trading at $91.67 on July 24. Investors continue to weigh Bitcoin’s spot price, Strategy’s cash needs, the cost of its preferred dividends, and MSTR’s market value relative to the company’s BTC holdings.

Historically, Strategy’s financing model relied on an equity market premium (mNAV) where MSTR traded above the value of the underlying Bitcoin reserve. That premium made share issuances an attractive way to acquire more BTC per share. When the premium compresses, issuing new equity is less favorable and the company shifts toward cash accumulation, authorised BTC sales, and buyback activity as part of active capital management.

How investors should interpret the stress test

The stress test offers one scenario: a steady annual decline in Bitcoin of 11.4% for 5.8 years and the company’s ability to fund interest and preferred dividends under that steady trajectory. It is not a forecast of Bitcoin’s future price nor a guarantee that Strategy can withstand all forms of market disruption.

Investors should monitor several variables that will determine future outcomes: Bitcoin market prices, access to capital, the company’s decisions on preferred dividends and share issuance, the terms on which debt can be refinanced, and the actual use of authorised Bitcoin sales. Each of these factors affects liquidity, solvency and the practical capacity to execute the company’s capital management plan.

Bottom line

Strategy’s internal BTC Floor ARR and the 1.0x BTC Rating provide a framework for assessing how long current assets might support its capital structure under a prolonged, steady BTC decline. While the metrics signal that the company can model a multi-year deterioration in Bitcoin without immediately breaching its internal coverage threshold, they rely on assumptions around refinancing, dividend policy and available liquidity that could be challenged in stressed markets. For crypto investors and analysts, the stress test is useful for understanding one part of Strategy’s risk profile — but it should be weighed alongside independent credit assessments, real-time liquidity metrics, and broader macro and market risk factors affecting Bitcoin and capital markets.