Why Strategy Keeps Buying BTC: Risk, Leverage and a CFO's Playbook

Executive snapshot

Strategy (the company formerly known as MicroStrategy) disclosed another debt-funded accumulation of BTC — around $75 million (reported as roughly 855 BTC in filings reported by the press) — even as the company's average purchase price sits above the current market and the position is broadly described as "underwater" in coverage. That paradox is the practical problem for any corporate treasury that treats Bitcoin as a material asset: the asset's long-term upside is being actively purchased today while short-to-medium-term mark-to-market losses pressure the balance sheet, liquidity ratios and investor sentiment.

This piece is aimed at C-suite treasury managers and institutional allocators. It parses the disclosed buys, explains how cost basis interacts with liquidity and debt, and lays out a pragmatic risk/return framework for CFOs weighing a corporate BTC allocation. I also place Strategy's behavior in the context of ETF flows and on-chain indicators that affect liquidity and downside risk.

What Strategy disclosed: the most recent buys and the numbers to know

According to coverage of the company's latest filings, Strategy added approximately $75 million of BTC — reported in the press as about 855 BTC — to its corporate treasury (see reporting in Bitcoinist). Media follow-ups highlighted how that incremental purchase occurred while the company's overall average purchase price remains above today's BTC market price, putting the holding at an unrealized loss on a mark-to-market basis (NewsBTC provides a useful roundup of that dynamic).

Why the precise math matters: when a public company reports a material BTC position it also reports an average cost basis, and investors/diligence teams will compare that line to spot BTC to compute unrealized losses. That comparison drives rating actions, equity sentiment and — crucially — any covenant tests tied to leverage or liquidity.

Cost basis versus current BTC price — how deep is “underwater”?

Public reporting and coverage indicate two separate but related facts:

• Strategy's aggregated average purchase price for its BTC stack is higher than current spot, producing a material unrealized loss on the balance sheet (see NewsBTC analysis).
• Despite that, the company authorized another purchase, adding to the position at current market prices.

Put simply: buying while underwater increases both absolute exposure and the weighted average cost basis. For a corporate treasury that uses BTC as a strategic reserve, this is a bet that future appreciation will more than offset near-term paper losses and any incremental financing costs.

Balance-sheet mechanics and leverage risks for a public company

Holding BTC as a corporate asset is not just an underwriting question — it's a corporate finance problem. Key channels of risk:

• Mark-to-market volatility. Public companies typically disclose fair-value changes for crypto holdings. Large unrealized losses reduce shareholders' equity and can push leverage ratios higher on a debt-to-equity basis.
• Debt structure and collateralization. If debt instruments are unsecured, rising unrealized losses still hurt covenants through lower equity. If debt is crypto-collateralized (less common for the very largest corporates but used by some firms), a price drop can trigger margin calls or forced liquidations.
• Convertible bonds and interest costs. Strategy and similar corporates have used convertible and fixed-income financings to fund Bitcoin purchases. Interest expense and potential dilution from conversions amplify the cost of holding through downturns.
• Liquidity mismatch. BTC is liquid on large exchanges in normal markets, but liquidations in stressed markets widen spreads and can create execution risk for large sellers.

The net effect: the same BTC that offers upside in a bull cycle can tighten liquidity, strain covenants and increase the cost of capital during a drawdown.

Shareholder dilution, debt covenants and investor governance

There are three practical ways corporate BTC accumulation can dilute shareholders or change capital structure:

1. Equity issuance to fund purchases. History shows some companies have issued shares to raise cash for BTC buys. New issuance at depressed equity prices is dilutive and often unpopular.
2. Issuance of convertible or straight debt. Convertible notes can convert into equity at predetermined prices, diluting existing shareholders later. Straight debt increases fixed obligations and tightens leverage ratios.
3. Covenant breaches and renegotiation. Material unrealized losses reduce book equity and may cause covenant breaches that force renegotiation on unfavorable terms or accelerate repayments.

For boards and CFOs, the governance question is whether the treasury policy and investor disclosures make these trade-offs explicit before the market forces them. Transparent policy, pre-approved capital limits and investor communications reduce surprise and help preserve optionality.

Market liquidity and macro context: ETF flows and exchange reserve signals

Two market indicators matter for near-term execution risk:

• Spot ETF flows and institutional demand. Even when spot prices drift lower, institutional flows into spot ETFs can provide a steady bid and improve liquidity concentration. Recent reports show continued institutional inflows into spot BTC ETFs — Fidelity's FBTC was leading inflows in one update as total flows hit meaningful levels — which helps explain why some corporates continue to accumulate amid volatility (see Blockonomi for ETF-flow context).
• Exchange reserves and on-chain supply pressure. On-chain analysis that tracks exchange reserves shows that rising inflows to exchanges typically increase near-term sell-side pressure and heighten downside risk (Coinspeaker covers a recent surge in exchange reserves that traders use as a warning sign).

The interplay: if ETF demand is steady and exchange reserves are stable or falling, a corporate buyer is less likely to face severe execution costs. If exchange reserves surge while ETF demand weakens, staircase selling could depress prices and raise funding costs for leveraged corporates.

How Strategy's behavior signals to other corporates and allocators

There are three messages being sent:

1. A vote of confidence in long-term BTC appreciation. A corporate repeatedly buying through downtrends communicates a strategic allocation view rather than a market-timing play.
2. Appetite for balance-sheet risk. Persistent accumulation while underwater suggests a tolerance for equity compression and funding risk that not every corporate CFO or board will accept.
3. Preference for direct exposure over ETF allocation. Some institutions prefer direct custody for control and optionality, but others will point to ETFs as a more governance-friendly route into BTC.

For other corporates or institutional allocators, Strategy’s actions function as a case study: the payoff exists, but so do acute corporate-finance implications. Treasury teams will watch how markets, rating agencies and lenders respond; that reaction informs whether others follow or pause.

Historical precedents and hard lessons

There are a few helpful precedents:

• Strategy (MicroStrategy) itself is the most visible example of corporate BTC accumulation as a treasury strategy; its repeated purchases have become the de facto case study for this approach.
• Tesla’s 2021 BTC purchase (and partial later sales) illustrated how corporates can deploy liquidity for strategic exposure and then reverse course as macro conditions change.

The lessons: (1) communicate policy clearly and early, (2) expect periodic pressure on equity and potential rating/covenant consequences, and (3) build governance that treats crypto as a strategic, not speculative, reserve.

A practical risk/return framework for CFOs contemplating corporate BTC exposure

Below is a step-by-step framework designed for treasury teams evaluating whether and how to add BTC to the corporate balance sheet.

1. Define the objective and sizing rule

• Is BTC a hedge, a strategic reserve, or a return-seeking allocation? Be explicit.
• Set a hard cap as a percentage of cash + short-term investments or as a percent of total assets.

2. Funding policy and capital structure constraints

• Prefer non-dilutive funding where possible (free cash flow). If issuing debt, quantify the incremental interest cost and worst-case covenant outcomes.
• Model how incremental purchases change debt/EBITDA, debt/equity and interest coverage ratios under stressed price scenarios.

3. Cost-basis management and purchase mechanics

• Use dollar-cost averaging limits and tranche-sizing to avoid concentrating purchase risk. Document maximum single-trade size (e.g., % of daily global BTC volume) to limit market impact.
• Track weighted average cost basis in treasury reports; disclose policy for reporting and impairment where applicable.

4. Stress-testing and scenario analysis

• Run scenario P&L and liquidity tests across a range of 30%, 50% and 70% drawdowns and define pre-agreed actions (e.g., stop buys, commence hedging, or sell non-core assets).
• Include covenant breach simulations and contingency plans for accelerated debt or margin events.

5. Hedging and liquidity overlays

• Consider partial hedges (options collars, forward sales) sized to protect short-term liquidity while preserving upside.
• Maintain a liquidity buffer in cash or high-grade securities equal to near-term debt maturities plus a conservative haircut of the crypto position.

6. Governance and disclosure

• Board-level approval for material treasury shifts; a dedicated sub-committee for crypto exposure can help.
• Clear disclosure policy on accounting treatment, tax implications and investor updates. Proactive transparency reduces surprise and reputational cost.

7. Operational controls

• Custody best practices, multi-signature arrangements, insured custodians and periodic independent audits.
• Limit single-custodian concentration unless offset by insurance and contractual guarantees.

8. Exit and conversion rules

• Pre-define triggers for partial or full liquidation (e.g., sustained negative performance, covenant breach, or strategic capital needs).
• Define conversion pathways if the company prefers to swap direct holdings into ETFs or OTC baskets to reduce governance friction.

Practical checklist for immediate CFO action

• Calculate current weighted average cost basis and unrealized loss as a percent of equity.
• Run covenant-impact scenarios for 25–75% BTC drawdowns.
• Ensure at least 3–6 months of liquidity coverage for upcoming debt maturities without needing to liquidate BTC.
• Assess alternative access methods (spot ETF exposure vs. direct custody) and document governance rationale.

Conclusion: an informed, conditional allocation

Strategy's continued purchases while underwater are neither reckless bravado nor a template to copy verbatim. They are, instead, an explicit corporate choice to accept balance-sheet volatility for the potential of outsized long-term returns. Whether that choice makes sense for any given company depends on funding sources, debt structure, covenant tolerance and investor governance.

For treasury leaders, the decision should be framed as corporate finance first and crypto exposure second. Clear objectives, capital limits, stress tests and operational controls convert what looks like a headline risk into a manageable treasury policy. Institutional context — including sustained ETF flows and exchange-reserve trends — changes execution risk, so those market inputs should feed into any purchase cadence.

Finally, while Strategy's example will draw attention, it is only one possible path. Many corporates will prefer a hybrid approach: a small strategic allocation implemented via ETFs or delegated managed accounts, coupled with strict disclosure and liquidity rules. Bitlet.app's product set and market coverage reflect the same reality: crypto allocations are multi-dimensional and require both execution and policy craftsmanship.

Sources

• Strategy bought another $75m of BTC despite holdings near underwater — Bitcoinist
• Coverage on Strategy's position and average purchase price — NewsBTC
• On-chain supply and exchange reserve signals — Coinspeaker
• ETF flows and institutional demand context — Blockonomi

For further reading on corporate treasury policy frameworks and how institutions are integrating crypto, see market coverage on Bitcoin and the broader DeFi ecosystem.