on MicroStrategy's Bitcoin Strategy
Why owning MicroStrategy stock isn’t the same as owning Bitcoin, and what risks lurk beneath the surface
If you’ve been following crypto, you’ve heard Michael Saylor, former MicroStrategy CEO, hailed as a visionary for stacking Bitcoin in corporate treasury — over 700,000 coins worth billions. But look closer. Are you really owning Bitcoin when buying MicroStrategy stock, or just a company laden with risky debt? This article unpacks the realities behind Saylor’s pitch, highlights hidden leverage dangers, and explains why self-custody could be your safest bet.
What You’re Buying When You Buy MicroStrategy Stock
Michael Saylor convinced investors he was the smart money play — a company with 714,644 Bitcoin, worth $54 billion, and a “never sell” policy. But here’s the catch. Buying MicroStrategy’s stock doesn’t mean you own Bitcoin directly. You own shares in a company that owns Bitcoin, mixed with:
- $8.2 billion in convertible debt — loans that convert to shares if the stock price stays high or demand cash if it drops.
- $16 billion in total obligations including preferred shares offering an 11.25% dividend paid in cash.
Their average Bitcoin purchase price is around $76,000 per coin, which closely matches today’s Bitcoin price between $69,000 and $77,000. This means they’re barely breaking even, with little to no gains locked in.
Investor Takeaway
MicroStrategy’s exposure is highly leveraged. They have piled up debt and dividend obligations that must be serviced regardless of Bitcoin price. That “never sell” promise could falter when convertible notes mature or if prices drop sharply.
The Sales Pitch Versus The Reality
Investors buy MicroStrategy for reasons like:
- Tax efficiency: Holding actual Bitcoin in retirement accounts isn’t possible, but MicroStrategy stock is.
- Innovation: The company proves corporate Bitcoin treasury is viable.
- Dividend yield: Preferred shares pay 11.25%, enticing income investors.
But watch out:
- Tax efficiency: You trade simple Bitcoin tax reporting for complex corporate risk structures layered six levels deep.
- Innovation: Buying the stock isn’t the same as owning Bitcoin. Thanks to MicroStrategy for the proof of concept, but actual Bitcoin ownership beats owning stock.
- Dividends: These come from a $2.25 billion cash reserve created by debt and equity sales, not Bitcoin gains. If Bitcoin falls, these dividends drain cash and increase risks.
How MicroStrategy’s Leverage Threatens Your Exposure
MicroStrategy recently raised its average Bitcoin cost, buying coins above $90,000 in 2024–25, during a rally. That means:
- The company is carrying maximum leverage at peak prices.
- Declining Bitcoin prices can rapidly erode collateral value.
- Convertible notes and dividend payments are fixed obligations.
If Bitcoin dips 20% or more:
- Covenants could trigger default risk.
- The company would need emergency capital at dilutive terms.
- The $2.25 billion cash reserve for dividends could be quickly depleted.
Data Callout
Bitcoin historically suffers 30%+ drawdowns about four times in five years, making these scenarios not only possible but likely at some point.
Counterparty Risks: Your Bitcoin Isn’t Your Bitcoin Here
When you hold MicroStrategy stock, your Bitcoin exposure is layered through:
- Your broker
- The stock exchange
- MicroStrategy’s custodians (e.g., Fidelity, Coinbase)
Each layer can fail, be hacked, or freeze assets. Plus, company leadership can change strategies or sell assets, potentially harming shareholders. Preferred shareholders get paid before common ones, further risking your returns.
The Safer Alternative
Owning Bitcoin yourself, with your keys and on-chain custody, eliminates these counterparty risks.
What Could Break MicroStrategy and How Likely Is It?
| Scenario | Likelihood | Impact |
|---|---|---|
| Bitcoin Price Drop 20–30% | High | Medium |
| Convertible Notes Default | High if above occurs | High |
| Leadership/Strategy Shift | Medium | Medium-High |
| Custodian Failure or Hack | Low-Medium | High |
| Market Liquidity Freeze | Medium | Medium |
Summary
The most probable risk is a Bitcoin price drop leading to financial strain on MicroStrategy’s leveraged position, forcing dilution or worse.
Risks / What Could Go Wrong
- Leverage-induced collapses: High debt and dividend payments create stress if Bitcoin price dips.
- Counterparty failure: Custodians can be hacked or freeze assets.
- Market risk: Illiquidity during market downturns can trap your shares.
- Management discretion: Board decisions or leadership changes could pivot away from Bitcoin focus.
If you are buying MicroStrategy stock expecting pure Bitcoin exposure, you’re stacking risk multiple layers deep.
Actionable Summary
- Buying MicroStrategy stock is not the same as owning Bitcoin; it adds corporate debt and counterparty risk.
- The company’s average Bitcoin cost near $76,000 and heavy leverage mean break-even or worse at current prices.
- Preferred shares offer dividends paid from cash reserves funded by debt, not Bitcoin profits.
- A 20%+ Bitcoin price drop could stress or break the company’s financial health.
- The safest way to gain Bitcoin exposure remains direct ownership with self-custody.
For deeper dives on crypto strategies, risk controls, and trade setups, get the full playbook in today’s Wolfy Wealth PRO brief.
FAQ
Q: Does buying MicroStrategy stock equal owning Bitcoin?
No. You own shares of a company that owns Bitcoin, layered with debt and operational risks.
Q: What is the average cost of MicroStrategy’s Bitcoin?
As of Q4 2025, around $76,000 per Bitcoin, close to current market prices.
Q: Why does MicroStrategy pay dividends if it only holds Bitcoin?
Dividends come from a $2.25 billion cash reserve funded by debt and equity, not Bitcoin gains.
Q: What happens if Bitcoin drops 20%?
MicroStrategy’s financial obligations rise relative to asset value, risking covenant breaches and share dilution.
Q: How can I avoid these risks?
Hold Bitcoin yourself with private keys and self-custody to eliminate counterparty risks inherent in stocks like MicroStrategy.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Cryptocurrency investments carry risk and you should do your own research or consult a professional before investing.
By Wolfy Wealth - Empowering crypto investors since 2016
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Disclosure: Authors may be crypto investors mentioned in this newsletter. Wolfy Wealth Crypto newsletter, does not represent an offer to trade securities or other financial instruments. Our analyses, information and investment strategies are for informational purposes only, in order to spread knowledge about the crypto market. Any investments in variable income may cause partial or total loss of the capital used. Therefore, the recipient of this newsletter should always develop their own analyses and investment strategies. In addition, any investment decisions should be based on the investor's risk profile
