Will Bitcoin fall to 80,000 USD break the model of Strategy?

Author: Ekko an, Ryan Yoon Source: Tiger Research Translation: Shan Oppa, Jinse Cai Jin

As the price of Bitcoin falls, the market's focus shifts to DAT Company, which holds a large amount of Bitcoin, with Strategy being one of the most notable companies. The key question is how the company accumulates assets and how it manages risks in the face of increasing market volatility.

Key Takeaways

• The static bankruptcy threshold for Strategy is expected to be around $23,000 in 2025, nearly double the $12,000 in December 2023.
• The company will transform its financing model in 2024 from simple cash and small convertible bonds to a diversified mix of convertible bonds, preferred stocks, and ATM issuances.
• The call options held by investors allow them to redeem early before expiration. If the price of Bitcoin drops, investors are likely to exercise the option, making 2028 a critical risk window.
• If the refinancing fails again in 2028, assuming the price of Bitcoin is $90,000, Strategy may need to sell approximately 71,000 Bitcoins. This amounts to 20% to 30% of the average daily trading volume, which would put significant pressure on the market.

1. Regarding the Stability of Strategy

The recent decline in Bitcoin has led to a drop of about 50% in DAT company's stock price. This has raised a core question in the market: does the robustness of the Strategy still exist when both the stock price and the company's core assets are declining? JPMorgan pointed out that concerns have further intensified after the Strategy may be excluded from the MSCI index.

The focus is not limited to the stocks themselves. The scale of the Bitcoin position held by this strategy is sufficient to impact the entire market, far exceeding the scale of typical whales. This raises two key questions.

1. At what level will the Bitcoin price cause the Strategy's balance sheet to collapse?
2. When and under what conditions can the company have a market impact

This report reviews the documents of the U.S. Securities and Exchange Commission to determine the effective bankruptcy threshold of the strategy, the periods of increased risk, and the potential impact on the market if stress scenarios occur.

2. Strategy Facing Risks: $23,000 Threshold

Before we proceed with the analysis, let's clarify the concept of static bankruptcy. Static bankruptcy refers to a situation where a company is unable to repay its debts even after liquidating all its assets.

In short, static bankruptcy refers to a situation where assets are less than liabilities. For example, if Echo Company has a property worth 1 billion won and 100 million won in cash, but liabilities of 1.2 billion won, then from the balance sheet perspective, the company is already insolvent. DAT Company is also facing the same situation. If the price of Bitcoin falls below a certain level, the book equity will turn negative, and the company will be unable to repay its debts. This level is known as the static bankruptcy threshold.

To determine the static bankruptcy threshold of the Strategy, we first examine how the company has accumulated its Bitcoin holdings.

Since 2020, the strategy has regarded Bitcoin as a strategic asset, but its accumulation pattern has changed after 2023. Prior to this, the company primarily relied on cash reserves and small convertible bonds to purchase Bitcoin. Its holdings maintained a low level of 100,000 Bitcoins, and the refinancing needs were relatively limited.

Starting from 2024, the financing method will change. This strategy aims to increase leverage by combining the issuance of preferred shares, ATM stock plans, and large-scale convertible bonds, thereby providing funds to purchase more Bitcoin.

This has led to a rapid acceleration in the accumulation of Bitcoin. This structure has created a cycle: the rise in Bitcoin prices boosts the company's market value, enabling it to obtain greater leverage, which in turn supports further purchases.

The goal remains unchanged, but the capital structure and risk conditions have changed. This structural shift has now become a core factor exacerbating the bankruptcy risk of the Strategy.

Strategy expects the static bankruptcy level to be around $23,000 in 2025. Below this level, the value of its Bitcoin holdings will be less than its liabilities, resulting in the company being insolvent on its balance sheet.

The key point is that this threshold has been continuously rising. In 2023, the company was able to withstand a Bitcoin price around $12,000. In 2024, the threshold rose to $18,000, and in 2025 it reached $23,000. As Strategy increases its Bitcoin holdings, the critical price levels also rise accordingly.

Therefore, the $23,000 threshold represents the minimum price required for the stable operation of Bitcoin. This means that Bitcoin would need to drop about 73% from the current level to trigger bankruptcy risk.

3. Convertible Bonds: The Issue Lies with the Holder's Put Option, Not the Maturity Date

As mentioned earlier, due to the growth rate of liabilities exceeding the amount of Bitcoin held, the static bankruptcy threshold for the Strategy has been raised to $23,000. The next question is how these debts are structured.

Between 2024 and 2025, Strategy adopted a new financing model that combines convertible bonds, preferred stocks, and ATM stock plans. Among these instruments, convertible bonds account for the largest share and have the most significant impact on the market.

The key is not in the size or maturity date of the convertible bonds, but in the timing of the holder exercising the put option.

This clause allows investors to request early repayment, and the company cannot refuse. Most holders of large convertible bonds issued in 2024-2025 have redemption dates concentrated around 2028, making 2028 a key year for Strategy to demonstrate its refinancing capability.

If the price of Bitcoin approaches bankruptcy thresholds or the market conditions worsen in 2028, investors are likely to exercise put options rather than wait for expiration. A wave of put option exercises will require Strategy to raise billions of dollars in cash immediately.

The problem is that almost all the funds raised through these convertible bonds are used to purchase Bitcoin. If these funds were invested in productive assets that could generate cash flow, the company would naturally have a source to repay the funds. However, the focus on accumulating Bitcoin has led to very little cash available for redemption.

Therefore, repaying debts will require asset sales. If the Bitcoin price is low when the options window opens, the Strategy may immediately face a liquidity shortfall. Forced selling will further depress prices, raise the bankruptcy threshold, and may trigger a vicious cycle.

4. Preferred Stock: Why Choose a 10% Dividend Burden

Starting from 2025, the company's strategy will shift from issuing nearly zero-interest convertible bonds to issuing preferred stocks with a dividend yield of around 10%. At first glance, this seems to be a costlier option.

However, this decision reflects the increasing refinancing pressure in 2027-2028. The concentration of investments by holders in 2028 will significantly increase mid-term repayment risks. Any sustained cash outflows during this period will increase the risk of bankruptcy.

The key feature of preferred shares is that dividends do not need to be paid in cash. The strategy is designed at issuance to allow dividends to be paid in the form of stock when needed. This enables the company to raise funds without immediately causing a cash outflow and to fulfill dividend payment obligations without using cash. In fact, preferred shares help the company avoid selling Bitcoin during the critical period of 2027-2028.

Although a 10% dividend yield looks attractive, paying dividends in the form of stock makes it a tool for maintaining liquidity and preventing short-term cash shortages.

However, this structure also brings new challenges. Paying dividends in the form of stock will continually dilute the rights of common shareholders. The Strategy itself faces the potential dilution of equity from the future conversion of convertible bonds, while preferred shares add another layer of equity pressure.

Preferred shares also enjoy priority in repayment. If a company faces pressure from both debt repayment and operational costs simultaneously, the repayment to preferred shareholders must take precedence over that of common shareholders. Although preferred shares do not have a fixed maturity date, their dividend obligations constitute a structural fixed cost, affecting the company's actual bankruptcy threshold.

By 2024-2025, the Strategy has shifted from a low-cost convertible bond model to a hybrid structure combining convertible bonds, preferred stock, and ATM issuance. This transition has allowed for a rapid expansion of Bitcoin holdings in the short term.

5. What happens if the Strategy falls into crisis?

If Strategy is unable to refinance in 2028, its impact on the market can be estimated through its repayment obligations.

A large number of convertible bonds issued in 2024-2025 will generate approximately $6.4 billion in potential repayments by 2028. If market conditions are weak and priority issuances, ATM issuances, and new convertible bonds cannot be issued, the company will have no choice but to sell Bitcoin.

Assuming the price of Bitcoin is $90,000, Strategy needs to sell about 71,000 Bitcoins to fulfill these obligations. This is not comparable to the typical scale of institutional sales.

The current average daily trading volume in the spot market is between $20 billion and $30 billion. Selling 71,000 bitcoins at a price of $90,000 amounts to approximately $6.4 billion, which represents about 20% to 30% of the daily trading volume. Such a large-scale sell-off in a short period of time will almost certainly create significant price pressure.

What is even more concerning is that such sell-offs are not one-time events. As the price of Bitcoin declines, the asset value of Strategy will immediately decrease, thereby weakening its financial ratios. This will further limit its ability to raise funds and may force it to sell more Bitcoin.

The result is a vicious cycle: failed refinancing leads to forced sales, forced sales lead to price declines, price declines reduce asset value, and the company is forced to sell further assets. Even if this dynamic persists for several quarters, it may lead to a balance sheet deterioration that is irreparable.

Therefore, the structural risk of the Strategy is concentrated in 2028. Outside of this window, the leverage model appears manageable, but if refinancing does not occur in 2028, it could trigger sell-off pressure sufficient to impact the entire Bitcoin market.

Therefore, the year 2028 is crucial not only for the survival of Strategy but also for the potential volatility of the entire Bitcoin ecosystem.

6. The strategy is relatively stable, but latecomers face higher risks.

Market narratives often simplify DAT risk to a simple question: Can a company survive each drop in Bitcoin? However, this analysis shows that the key factor determining a company's survival is not short-term price fluctuations or stock volatility, but rather the company's balance sheet and the design of its capital structure.

Therefore, assessing digital asset technology companies requires more than just focusing on their stock price or the decline in Bitcoin prices. Key indicators include the position of their static bankruptcy threshold, the timing of cash repayment pressures, and the tools used to bridge financing gaps. These factors help us understand their structural resilience rather than short-term fluctuations.

Not all risks can be predicted. ETF fund flows, macroeconomic conditions, and changes in regulatory policies can reshape the market environment at any time. Even so, the most reliable benchmark remains the bankruptcy threshold implied by financial data and the fundamental cash flow mechanisms of the company.

Strategy Company stands out in this regard. The company entered the Bitcoin market in 2020, weathered the downturn of 2022, and accelerated its accumulation through leveraged financing in 2024. Its combination of convertible bonds and preferred stocks has created a multi-layer buffer.

Therefore, Strategy has a relatively stable foundation. In contrast, new entrants have not yet established a mature data asset technology framework, and their ability to withstand significant price declines is far less stable than that of the former.

This report aims to lay the groundwork for assessing DAT Company by quantifying signals rather than fear or optimism, and emphasizes the truly important structural risks.