How Strategic Approaches Acquire Bitcoin During Market Declines

Key Insights

• The strategy primarily funds its dip acquisitions through ATM equity sales rather than relying on operating cash flow.

• Utilizing preferred shares and other financing methods enhances buying capacity but incurs ongoing dividend and interest responsibilities.

• A reserve of $1.44 billion aims to alleviate “forced seller” anxieties during extended market downturns.

• The model is constrained by the cost of capital, with risks of dilution, market sentiment shifts, and index rule changes potentially tightening financial flexibility.

The strategy recently allocated an additional $980.3 million for Bitcoin (BTC), acquiring 10,645 BTC at an average price of $92,098, raising its total holdings to 671,268 BTC.

This headline aligns with the expectations the company has set in the market. During periods of price weakness, the strategy approaches it like a seasonal inventory opportunity.

The current scenario is particularly intriguing. Bitcoin has been experiencing a significant decline from its recent peaks, and the company’s stock often mirrors that decrease as a leveraged proxy.

Concurrently, the company has been establishing a $1.44 billion reserve to address concerns regarding dividend and interest responsibilities that could compel a Bitcoin sale during prolonged downturns.

Thus, the pivotal question isn’t whether the strategy aims to acquire more Bitcoin during dips; rather, it revolves around the methods employed to finance these purchases and the sustainability of this model amid adverse market conditions.

The “Bitcoin Treasury” Framework

The strategy positions Bitcoin as a central asset on its balance sheet, utilizing public market funding to expand holdings at a rate surpassing typical operational cash flow growth.

This entails raising funds through avenues such as at-the-market (ATM) share sales and other financial instruments, then channeling the resulting capital into BTC, even amidst price fluctuations.

To clarify their narrative for investors, the strategy employs specific Bitcoin-related metrics. A crucial metric is “BTC Yield,” defined as the change in Bitcoin allocated per share over periods, illustrating whether each diluted share is associated with an increasing Bitcoin ratio over time.

Consequently, the focus shifts from simply stating “we bought additional BTC” to emphasizing “we enhanced BTC exposure per share.”

Did you know? The Bitcoin treasury model was officially adopted on September 11, 2020, once the board sanctioned a Treasury Reserve Policy designating Bitcoin as the main treasury reserve asset, complemented by excess cash and short-term investments.

Funding Purchases During BTC Declines

The strategy’s acquisition of Bitcoin during dips is primarily financed through capital markets by issuing securities and transforming that demand into Bitcoin.

The company is notably transparent about this in its disclosures. In the same Form 8-K that announced the recent acquisition of 10,645 BTC, it explicitly noted that the Bitcoin was obtained through proceeds from its ATM program sales.

1) The “ATM” Method (Common Stock)

An ATM initiative is essentially a continual authorization to sell shares gradually in the open market instead of conducting a single, significant capital raise.

In the week corresponding to the latest Bitcoin purchase, from December 8-14, 2025, the strategy reported selling 4,789,664 shares of MSTR, resulting in net proceeds of $888.2 million.

This structure elucidates how the company can maintain its purchasing activities even amid an unfavorable macroeconomic climate, enabling it to quickly translate equity demand into Bitcoin without needing to await an ideal “risk-on” moment.

2) Preferred Stock as an Additional Funding Avenue

In addition to common stock, the strategy has issued several preferred series. The Form 8-K mentions STRF, STRK, and STRD, among others.

During the same week, the firm also reported selling preferred shares, including STRD and minor quantities from other series, contributing to the funding strategy.

The trade-off here is that preferred shares generally come with ongoing dividend obligations, which gain significance during price drops and changing sentiments. Nevertheless, they provide the strategy with supplementary options for raising capital when market conditions for common stock are not ideal.

3) Debt and Convertible Financing: Leverage with a Long-Term Vision

Even though immediate purchases are often financed through ATM flows, the strategy’s overarching approach has long incorporated debt and convertible financing to amplify Bitcoin accumulation.

If the company believes that long-term Bitcoin appreciation outstrips its long-term capital costs, it will continue acquiring Bitcoin as long as market conditions permit reasonable funding.

Analysts monitoring this structure frequently characterize it as a premium and leverage mechanism. When the stock trades at a high valuation compared to Bitcoin holdings, issuance becomes more straightforward. Conversely, when that premium diminishes, the machinery operates at a slower pace.

In summary, it’s a cyclical process: Issue common stock, preferred shares, or debt; raise capital; purchase BTC; disclose the Bitcoin per share progress; and strive to maintain investor interest for subsequent rounds.

Due to this cycle, the sustainability of the strategy’s dip purchasing, particularly during market downturns, hinges more on market conditions than sheer determination.

Why Market Downturns Can Act as Accumulation Phases for This Model

Theoretically, a market downturn is the least favorable period for a frequent buyer. Prices decline, media sentiments are negative, and lenders become highly selective.

However, for the strategy, downturns serve as part of its value proposition. The focus is less on pinpointing the lowest price and more on demonstrating an ability to keep accumulating amidst volatility.

The key point is that “buying the dip” is only effective if the company’s cost of capital remains manageable.

When its stock trades at a significant premium relative to its existing Bitcoin value, issuing new equity appears advantageous for improving its Bitcoin per share narrative.

Contrarily, when that premium narrows—often during declines in Bitcoin and other risk assets—issuance costs increase, dilution becomes pronounced, and each additional purchase faces greater justification challenges.

This creates a reflexive element. Strong equity demand simplifies funding processes, bolstering Bitcoin purchasing and reinforcing demand.

In prolonged downturns, this cycle can reverse. Diminished sentiment constricts premium valuation, tightens funding channels, and decelerates accumulation. The strategy can still purchase under these circumstances, but the rate is determined by market appetite for its stock rather than Bitcoin’s pricing trends.

Did you know? The strategy is well-known for its dip-buying approach. In late March 2025, it acquired 22,048 BTC for approximately $1.92 billion, averaging $86,969 per coin, as per its March 31 filing detailing acquisitions from March 24 to March 30.

The $1.44 Billion “USD Reserve” and Its Purpose

The most straightforward response the strategy has provided to the enduring question “What if this downturn persists?” is its $1.44 billion reserve—an explicit cash buffer designated to cover preferred stock dividends and interest payments on outstanding debt.

The organization states this reserve was created using money derived from the sale of Class A common stock through its ATM programs.

This aspect is critical since the company’s capital composition is now part of its narrative. Preferred dividends and debt interest do not defer patiently for Bitcoin’s eventual recovery. In the event of a market freeze where the company cannot issue comfortably, those obligations are where critics may begin questioning whether Bitcoin reserves might be tapped to fill the void.

The strategy aims to counter that narrative proactively. In its December 1 announcement, the company revealed its intention to maintain sufficient funds in its USD Reserve to sustain at least 12 months of these payments, with aspirations to extend this period to 24 months or longer over time. The reserve is currently reported to cover 21 months of dividends.

In summary, it serves as a “no forced selling” assurance, aimed at ensuring long-term survival during downturns while the Bitcoin acquisition strategy remains active.

Challenges of Dilution, Increased Carrying Costs, and Index-Rule Pressures

The primary constraint lies in dilution.

The accumulation cycle functions effectively as the company can frequently sell new securities, particularly common stock via its ATM program, translating that demand into Bitcoin. However, the downside is that the total share count gradually increases, prompting the firm to advise investors to evaluate performance through metrics related to Bitcoin per share rather than merely total BTC holdings.

During downturns, dilution becomes a sharper critique since the stock price is often lower while the company is actively issuing shares.

Next is the issue of carrying costs.

Fixed obligations, such as preferred dividends and debt interest, remain unchanged when capital prices rise. As a result, the company requires new issuances, adequate cash reserves—which underpins the importance of the USD Reserve—or alternative liquidity solutions to manage those payments smoothly.

The longer a downturn persists, the more investors concentrate on whether financing conditions remain favorable.

Finally, there’s sensitivity to index and regulatory changes.

Inclusion in major indices can bolster marginal demand for the stock, yet classification frameworks for companies focusing on digital asset treasury management are still evolving. MSCI’s consultation regarding firms with substantial Bitcoin reserves is one of the most notable aspects to monitor, as an unfavorable ruling could alter how certain funds are permitted to manage or size their exposure.

Did you know? During the crypto crash of 2022, Strategy, previously known as MicroStrategy, reported a substantial paper loss of $917.8 million on its Bitcoin assets in Q2 2022, disclosed alongside its earnings on August 2, 2022.

Reasons for Increased Earnings Volatility

Another factor contributing to the perception of heightened volatility within the strategy’s earnings is accounting practices. New U.S. directives regarding corporate-held crypto, ASU 2023-08, shift qualifying crypto assets to a fair value basis, resulting in unrealized gains and losses affecting net income during every reporting period.

This means significant Bitcoin fluctuations late in a quarter can dramatically alter reported earnings, even if the company does not sell any Bitcoin and its operational liquidity remains unchanged.

For investors, reported profits can mirror Bitcoin’s price movements closely. In downturn periods, this mechanism can magnify negative perceptions, even though the company continues to fund purchases through issuance and cash reserves.

What Sustains the “Strategy”?

The strategy’s approach to buying during downturns appears unyielding as it has established a replicable system: issue securities, raise funds, acquire Bitcoin, then assess success in terms of Bitcoin per share. The ongoing challenge lies in ensuring this mechanism remains cost-effective and accessible amidst persistent market stress.

• Observe how much capacity remains in the ATM programs and whether the strategy continues to transform issuances into purchases at a rate comparable to the current speed.

• Monitor the status of the $1.44 billion USD Reserve to see if it remains a growing buffer or transitions into a reminder that dividends and interest are genuine liabilities that must be addressed regardless of Bitcoin’s performance.

• Keep an eye on the treatment of digital asset treasury firms by index providers and regulatory bodies, as alterations in this area could subtly shift the pool of investors supporting the entire model.