Big Trouble Looms for MicroStrategy Shares as Bitcoin Declines Deepen. What’s the Best Strategy for MSTR by January 2026?

Strategy (MSTR): From Software Firm to Bitcoin Giant Faces Massive Losses

Once known as MicroStrategy, Michael Saylor's company—now called Strategy (MSTR)—has shifted from business software to becoming a major Bitcoin holding entity. In the fourth quarter of 2025, Strategy reported an unrealized loss of $17.44 billion after Bitcoin prices dropped 25% during the December quarter. This sharp downturn follows a previous $3.9 billion unrealized gain in Q3, underscoring the dramatic swings and high risk tied to the company’s Bitcoin-focused approach.

With the adoption of new accounting rules in early 2025, Strategy is now required to value its Bitcoin holdings at market prices every quarter. This change has led to significant fluctuations in reported earnings, closely mirroring Bitcoin’s price volatility.

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Shares of MSTR declined by 53% in the fourth quarter and have dropped 66% from their peak, as investors worry about the company’s ability to manage its debt and pay dividends without substantial cash flow. In response to liquidity concerns, Strategy built a $2.19 billion cash reserve by selling stock. Despite facing a significant paper loss, the company continued to expand its Bitcoin position, acquiring an additional $116.3 million in Bitcoin at the start of January.

Currently, Strategy holds approximately $60 billion worth of Bitcoin, while its market capitalization stands at $47 billion. Is now the right time to consider owning MSTR shares?

MSTR Stock: Expect Ongoing Volatility

Michael Saylor’s aggressive Bitcoin treasury strategy remains a source of anxiety for investors. Last month, the company set aside $1.44 billion in cash to cover upcoming dividend and interest payments—a move that signals concern about meeting obligations without liquidating Bitcoin. As of the end of 2025, this reserve was enough to cover 21 months of payments.

Strategy controls over 3% of all Bitcoin that will ever be mined, making it the largest institutional holder of the cryptocurrency. When the company issued guidance in October, analysts predicted Bitcoin would reach $150,000 by year-end. Instead, Bitcoin fell sharply from $111,612 in late October to a low of $80,660 by late November, forcing Strategy to lower its year-end price expectations to between $85,000 and $110,000.

Potential Losses and Financial Health

With the revised outlook, Strategy could face Bitcoin-related losses of $5.5 billion to $6.3 billion in 2025. The company’s average purchase price for Bitcoin is about $75,000, which is still below the current market price of $93,770.

In October 2025, S&P Global Ratings assigned Strategy a B-minus credit rating with a stable outlook. The agency noted that while Strategy’s assets are in Bitcoin, its debts and dividend obligations are denominated in cash. This mismatch is risky, as Bitcoin does not generate income to cover these payments.

The company’s original software business is expected to deliver a pre-tax margin of only 1.2% in 2025 and continues to struggle with cash generation. For the first half of 2025, Strategy reported $8.1 billion in pre-tax earnings, most of which came from Bitcoin’s appreciation rather than core operations.

S&P analysts are particularly worried about $5 billion in convertible bonds maturing in 2028, which are currently out of the money. If these bonds come due during a Bitcoin downturn, Strategy might be forced to sell Bitcoin at low prices or restructure its debt, risking default.

Despite these risks, Strategy is still aggressively buying Bitcoin, betting that it will continue to have access to capital markets even as traditional financial indicators suggest its position is becoming more precarious.

What’s Next for MSTR Stock?

The future of MSTR shares is closely tied to Bitcoin’s price movements. During the last major crypto rally, MSTR stock surged from $14 in January 2023 to $450 by July 2025, but it also suffered steep declines during market pullbacks.

Among the 16 analysts tracking MSTR, 13 rate it a “Strong Buy,” one suggests a “Moderate Buy,” and two recommend holding. The consensus price target is $486.29, implying nearly 200% upside from current levels.