As Bitcoin struggles to regain momentum, concerns around Michael Saylor’s Strategy are once again resurfacing. With Bitcoin recently falling toward $58,000 and Strategy’s stock dropping sharply, some investors fear the company could enter a so-called “death spiral.”
However, Bitcoin analyst Adam Livingston argues that the situation is not nearly as dire as many think.
Livingston recently ran a three-year stress test on Strategy using an extremely bearish scenario. The model assumes Bitcoin falls to $26,611 within six months, Strategy’s market net asset value ratio (mNAV) drops below 0.50x, capital markets shut down, and the company loses access to new funding.
Under these conditions, Strategy would eventually need to sell Bitcoin to service its debt obligations.
The results show that the company’s claim ratio would rise from 41.5% to 96.7%. More importantly for shareholders, common equity Bitcoin exposure would shrink dramatically, falling from 138,161 satoshis per share to just 7,884 satoshis per share.
Livingston also estimated that Strategy’s stock price could theoretically fall to around $1.01 during such an extreme downturn.
No Bankruptcy, But Heavy Dilution
Despite the severe assumptions, Livingston says the model does not support the popular “death spiral” narrative.
According to his analysis, Strategy would run out of cash around month nine and would need to sell approximately 115,727 BTC over the following three years. Even after those sales, the company would still hold around 731,636 BTC, while its mNAV would recover to roughly 1.40x.
For Livingston, the real risk is not bankruptcy but the decline in Bitcoin exposure for common shareholders.
Strategy Is Under Pressure
The analysis comes as Strategy-linked securities continue to weaken.
The company’s STRC perpetual preferred stock, which has helped fund recent Bitcoin purchases, recently fell as much as 26% below its $100 par value, touching a record low of $74 before recovering slightly.
Meanwhile, Strategy’s common shares dropped below $87, their lowest level since February 2024, extending losses of more than 50% over the past month.
Stronger Than the 2022 Bear Market?
Livingston said Strategy is still in a much stronger position than during the 2022 bear market.
At Bitcoin’s 2022 low, Strategy held 130,000 BTC while debt claims exceeded its Bitcoin holdings, leaving shareholders with negative Bitcoin exposure. Today, the company holds 847,363 BTC against senior claims of roughly 351,567 BTC, leaving substantial residual exposure for shareholders.
“Strategy has a balance sheet built for war,” Livingston said, arguing that the current downturn remains far less severe than the conditions faced in 2022.
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