Strategy Crosses 700k BTC; ‘Circular’ Yield Loop Sparks Credit Risk Fears

Strategy Inc. (formerly MicroStrategy) has disclosed holdings of 709,715 Bitcoin, valued at $64 billion, solidifying control over 3.3% of the total supply. The acquisition was funded not by operating cash flow, but through a complex issuance of Bitcoin-backed preferred stock (STRC, STRK) offering yields up to 11%. Markets reacted nervously; while Bitcoin held $90,200, Strategy shares (MSTR) slid 6% as analysts flagged the firm’s reliance on new capital to service existing yield obligations.

The ‘Circular’ Liquidity Trap

The mechanics of this expansion have drawn sharp criticism. Unlike traditional corporate debt serviced by revenue, Strategy is paying dividends on its preferred securities by issuing more securities. This creates a reflexive dependency: the model functions only as long as capital inflows exceed the ~$779 million in annual interest and dividend obligations.

The structure mirrors the circular funding loops that preceded the 2022 crypto credit collapse. If market access tightens, the $2.2B cash buffer is the only backstop before forced liquidation becomes a mathematical certainty.

Financial analysts note the risk is compounded by the sheer scale of the leverage. With debt exceeding $15.7 billion, a Bitcoin retracement below $50,000 could trigger covenant breaches that force Strategy to liquidate treasury assets into a falling market.

Institutional Complicity?

Despite the structural fragility, institutional giants remain deeply entrenched. BlackRock has accumulated a $470 million position in Strategy’s high-yield preferreds, effectively treating the corporate credit risk as a proxy for Bitcoin yield. This institutional endorsement has temporarily masked the underlying solvency risks, allowing Strategy to continue its aggressive accumulation despite a 50% drawdown in its stock price from November 2025 highs.