Bitcoin Updates: S&P Cautions That Excessive Dependence on Bitcoin and Liquidity Challenges Downgrade Strategy to Junk Status

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Bitget-RWA2025/10/28 01:50

By:Bitget-RWA

- S&P assigns B- rating to Strategy Inc., citing heavy bitcoin reliance, limited liquidity, and structural debt risks despite $73.7B BTC holdings. - Company's "currency mismatch" exposes it to liquidity strain as volatile bitcoin backs USD debt and dividends, with $8B in convertible debt maturing by 2028. - Sharp BTC price drops could force asset sales or debt restructuring, though stable outlook depends on maintaining capital access and avoiding prolonged price stress. - Rating aligns Strategy with high-r

S&P Global Ratings has

given a B- credit rating

Michael Saylor's Strategy Inc.

, previously known as MicroStrategy, categorizing the bitcoin-focused company as a junk bond issuer with a stable outlook. This rating is based on concerns about the company’s significant exposure to

bitcoin

, limited liquidity in U.S. dollars, and inherent risks in its financial structure, even though it holds $73.7 billion worth of bitcoin.

The agency pointed out that Strategy’s approach—acquiring bitcoin as a reserve while financing its operations through both equity and debt—results in a “currency mismatch.” The company’s obligations in U.S. dollars, including debt and dividends, are supported by the unpredictable value of bitcoin, which could put pressure on liquidity if the cryptocurrency’s price falls. S&P also highlighted that, although Strategy’s bitcoin reserves surpass its debt, the absence of cash flow from its main asset and its dependence on convertible debt heighten the risks involved.

The rating underscores a “substantially negative” risk-adjusted capital (RAC) ratio, which is determined by subtracting the market risk of bitcoin from the company’s equity.

Strategy

posted a negative cash flow of $37 million for the first half of 2025, with most of its income coming from unrealized profits on its bitcoin holdings. The company is also managing $8 billion in convertible debt, including $5 billion in notes that are currently out-of-the-money and will start maturing in 2028, along with $640 million in annual preferred dividends, which it intends to cover through at-the-market equity offerings.

S&P cautioned that a significant drop in bitcoin’s price could compel Strategy to liquidate assets at unfavorable prices or restructure its debt, despite its track record of careful capital management. The stable outlook depends on the company’s continued access to capital markets and its ability to avoid extended periods of price stress. A downgrade could occur if bitcoin’s value falls sharply or if liquidity becomes constrained, while an upgrade would require less dependence on convertible debt and improved dollar liquidity.

This rating puts Strategy in the same risk category as other high-risk crypto-related issuers, such as stablecoin operator Sky Protocol, both rated B-. Despite the speculative rating, TD Cowen analysts remain optimistic, predicting the company could amass nearly 900,000 BTC by 2027 as bitcoin becomes more integrated into mainstream finance, and, according to

The Block

, some market watchers believe

MSTR

stock could double. Strategy’s shares, currently trading around $298, have climbed as the company continues to add to its bitcoin reserves, most recently acquiring 390 BTC for $43.4 million.

Another article details

key points investors should understand

regarding the risks of a downgrade and what it could mean for shareholders.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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