MicroStrategy's situation at the end of 2025 vividly illustrates the opportunities and challenges a company faces when trying to redefine its financial boundaries.

Article author: Clow

Article source: TechFlow

670,000 Bitcoins, representing approximately 3.2% of the total global supply.

This is the amount of Bitcoin held by MicroStrategy (now Strategy Inc.) as of mid-December 2025. As the world's first publicly traded company to use Bitcoin as its primary reserve asset, this former business intelligence software provider has completely transformed into an "operating company that structures financial designs for Bitcoin."

The name change is not just a change of brand, but the ultimate declaration of its corporate strategy to completely shift to "Bitcoin-based".

However, as we enter the fourth quarter of 2025, with increased market volatility and potential changes in the rules of index compilers, this model, which founder Michael Saylor calls a "revolutionary financial innovation," is facing its most severe test since its launch in 2020.

So, where does MicroStrategy's funding come from? Is its business model sustainable? And what are the biggest risks?

From Software Company to "Bitcoin Bank"

In 2025, MicroStrategy officially changed its name to Strategy Inc., marking a complete transformation of its identity.

The company's core logic is not complicated: by leveraging the premium of its stock relative to the net asset value of Bitcoin, it can continuously raise funds to increase its Bitcoin holdings, thereby achieving a continuous increase in the amount of Bitcoin held per share.

In layman's terms: as long as the market is willing to give MSTR stock a higher valuation than the Bitcoin it holds, the company can buy more Bitcoin by issuing new shares, so that the number of Bitcoins held by each existing shareholder will not decrease but increase.

Once this "flywheel effect" is activated, it creates a positive feedback loop: stock price rises → stock issuance to buy cryptocurrency → BTC holdings increase → stock price continues to rise.

However, this flywheel has a fatal prerequisite: the stock price must consistently be higher than Bitcoin's net asset value. Once this premium disappears, the entire model will come to an abrupt end.

Where does the money come from? The three key elements of financing.

The outside world is curious about the source of funds for MicroStrategy's continuous purchase of Bitcoin. By analyzing the company's 8-K filings with the U.S. Securities and Exchange Commission (SEC), it is clear that its financing model has evolved from the early single convertible bond to a diversified capital matrix.

First move: ATM program – a money-printing machine that captures premiums.

MicroStrategy's core funding source is its At-the-Market (TM) program for Class A common stock (MSTR).

The operating logic is simple: when the trading price of MSTR stock is higher than the net value of its Bitcoin holdings, the company sells new shares to the market and uses the cash proceeds to buy Bitcoin.

In the week of December 8 to December 14, 2025, the company generated net proceeds of approximately $888.2 million through the sale of more than 4.7 million MSTR shares.

The appeal of this financing method lies in the fact that as long as the share price is higher than Bitcoin's net asset value, each issuance is a "boost" rather than a dilution for existing shareholders.

The second key move: Perpetual preferred stock matrix

In 2025, MicroStrategy took a significant step in capital instrument innovation by launching a series of perpetual preferred shares to attract investors with different risk appetites.

In a single week in December, these preferred shares received $82.2 million from STRD.

These preferred shares are typically structured as “capital return” dividends, which are tax-attractive to investors because they allow for a deferral of tax obligations for at least ten years.

The third move: "Plan 42/42"—an $84 billion ambition.

MicroStrategy is currently in the execution phase of its ambitious "42/42 Plan".

The plan aims to raise $42 billion through equity offerings and $42 billion through fixed-income securities over three years from 2025 to 2027, totaling $84 billion, all of which will be used to purchase Bitcoin.

This plan is an upgraded version of the previous "21/21 Plan," reflecting management's extreme confidence in the capital market's ability to absorb its securities. This large-scale capital operation effectively turns MicroStrategy into a closed-end fund with leveraged exposure to Bitcoin, but its operating company shell grants it financing flexibility that traditional funds lack.

The truth behind the "selling cryptocurrency" rumors

Recent rumors circulating in the market that MicroStrategy might be dumping Bitcoin seem untenable in the face of financial data and on-chain evidence.

In mid-November and early December 2025, on-chain data monitoring tools (such as Arkham Intelligence) observed a large-scale asset transfer within micro-policy-controlled wallets. Data showed that approximately 43,415 bitcoins (worth about $4.26 billion) were transferred from known addresses to over 100 new addresses. This triggered panic on social media, causing the price of Bitcoin to briefly fall below $95,000.

However, subsequent professional audits and management clarifications indicated that this was not a reduction in holdings, but rather a normal "custodian and wallet rotation." MicroStrategy, in order to reduce the credit risk of a single custodian and improve security, diversified its assets from traditional platforms such as Coinbase Custody to more defensive addresses. Arkham analysis points out that such operations typically involve the security requirements of address refresh, rather than asset liquidation.

MicroStrategy Executive Chairman Michael Saylor has repeatedly denied the rumors publicly, and stated clearly in a December tweet and CNBC interview: "We are buying, and the buying is quite large."

In fact, the company added 10,645 bitcoins in the second week of December at an average price of $92,098 each, which directly refuted the speculation that it was selling bitcoins.

Furthermore, the company's recently established $1.44 billion USD Reserve further demonstrates that it does not need to convert Bitcoin into cash to pay dividends or debt interest, and that the reserve can cover at least 21 months of financial expenses.

The neglected software business

Despite the focus on Bitcoin transactions, MicroStrategy's software business remains a crucial foundation for maintaining its status as a publicly traded company and covering its daily financial expenses.

In the third quarter of 2025, total revenue from the software business was $128.7 million, representing a year-over-year increase of 10.9%, exceeding market expectations.

Despite significant growth in subscription revenue, the business did not generate positive operating cash flow in the first six months of 2025 due to the company's continued investment in AI research and development and cloud infrastructure. Q3 free cash flow was negative $45.61 million, indicating that the company remained unprofitable at the operational level, and its continued accumulation of Bitcoin relied entirely on external financing.

Effective January 1, 2025, MicroStrategy adopted ASU 2023-08 standards, requiring the revaluation of Bitcoin holdings at fair value and the inclusion of the change in net income for the period. This change has made the company's book earnings highly volatile. In Q3 2025, due to the rise in Bitcoin prices, the company recorded $3.89 billion in unrealized gains, bringing quarterly net income to $2.8 billion.

Three swords of Damocles hanging overhead

Although micro-strategies reduce the risk of short-term forced liquidation through sophisticated financial design, they still face several systemic risks that could shake their foundations in the future.

Risk 1: Removal from MSCI index

The most direct risk currently facing micro-strategies comes from scrutiny by index compiler MSCI.

MSCI has launched a formal consultation proposing to reclassify companies whose digital assets account for more than 50% of their total assets as "investment vehicles" rather than "operating companies." Given that Bitcoin holdings constitute the vast majority of MicroStrategy's assets, if this rule is adopted, MicroStrategy will be removed from the MSCI Global Standard Index (GIMI).

This removal could force passive funds to sell between $2.8 billion and $8.8 billion worth of shares. Such a massive forced sell-off would directly depress its share price, thereby compressing MSTR's NAV premium. If the NAV premium disappears or even turns into a discount, its "flywheel" of buying Bitcoin through issuing new shares will come to a complete standstill.

Risk 2: NAV premium compression and financing stagnation

The entire logic behind the micro-strategy's increased holdings is based on the market's willingness to pay a premium higher than its net asset value.

By the end of 2025, this premium had shown significant volatility. In early December, due to market concerns about index removal, MSTR briefly traded at an 11% discount to the value of its Bitcoin holdings.

When a stock is trading at a discount, any new equity financing dilutes the amount of Bitcoin held per share by existing shareholders, forcing the company to halt asset accumulation and potentially facing creditor scrutiny regarding the integrity of its assets. MicroStrategy first suspended its ATM program in September 2025, reflecting management's high sensitivity to valuation multiples.

Risk 3: Debt pressure and theoretical liquidation price

As of the end of Q3 2025, MicroStrategy's total debt was approximately $8.24 billion, with annual interest payments of approximately $36.8 million, while preferred stock dividends amounted to $638.7 million annually.

Although its convertible bonds do not include Bitcoin collateral, reducing the risk of direct "liquidation" due to market downturns, the company's debt repayment ability will be tested if the price of Bitcoin experiences an extreme drop.

summary

MicroStrategy's situation at the end of 2025 vividly illustrates the opportunities and challenges a company faces when trying to redefine its financial boundaries.

Its intention to continue increasing its holdings remains unchanged, and by establishing a $1.44 billion dollar reserve, the company has built a defensive wall against a potential liquidity winter.

However, the biggest risk of micro-strategies does not come from the volatility of Bitcoin's price itself, but from its link to the traditional financial system—namely, its index status and NAV premium.

If institutions like MSCI ultimately decide to exclude it from traditional equity categories, MicroStrategy must find a way to demonstrate to investors that it, as a "Bitcoin-backed structured finance platform," can still grow independently of passive index inflows.

Whether the "42/42 Plan" can proceed as scheduled in the future will depend on whether it can continue to create attractive yield products for institutional investors in the process of Bitcoin financialization, while maintaining at least a minimum level of financial dignity amid the growing pains of cloud transformation in the software business.

This is not just an experiment by MicroStrategy, but a microcosm of the integration process between the entire crypto industry and the traditional financial system.

In this unprecedented gamble, the only certainty is that no one knows how this story will end.