What happens to MicroStrategy's multi-billion dollar bitcoin bet if BTC crashes?

The publicly traded software company MicroStrategy's multi-billion dollar bet on bitcoin — and specifically the question of what will happen to the company if bitcoin crashes — has become the subject of recent debate.

Around this time last year, MicroStrategy, which is listed on Nasdaq, became the first publicly traded company in the U.S. to buy and hold bitcoin as part of its balance sheet. Since then, the company has accumulated 108,992 bitcoins, worth around $5 billion at current prices.

In a recent interview with The Block, Saylor said his company has two strategies. The first one is to grow its business intelligence software business "as fast as we can in a responsible fashion." The second: "Invest our excess cash flows in bitcoin, and we hold it for the long term."

"I think bitcoin is the pristine property in cyberspace," said Saylor. "It's like Cyber Manhattan. I'm not buying it just to flip it or sell it."

That bet is paying off so far. Bitcoin has nearly doubled in price to over $45,000 currently, while MicroStrategy's average purchase price is about $26,800. That means the company is currently sitting on gains, on paper, of around $2 billion.

But the company's bitcoin investment is backed by debt worth over $2 billion. Some observers say that if the price of bitcoin were to plunge far enough, MicroStrategy could struggle to pay that debt back.

Borrowing billions to buy bitcoins

To fund its bitcoin purchases, MicroStrategy has taken out three loans.

First, in December 2020, it issued $650 million worth of convertible senior notes, which are debt securities that contain an option in which the notes can be converted into a certain amount of the issuer's equity once they mature. On their maturity date, the notes must either be converted into equity or repaid in cash or be settled in a combination of the two.

MicroStrategy issued these initial notes at a 0.750% interest rate, and they are due in December 2025. Then, in February 2021, the company issued $1.05 billion worth of additional convertible senior notes, this time at a 0% interest rate and a maturity date of February 2027.

Finally, in June 2021, MicroStrategy issued $500 million worth of senior secured notes — which are a type of loan backed by the issuer's assets as a form of collateral — at a 6.125% interest rate due in June 2028. These notes are secured by MicroStrategy's assets, including any bitcoins or other digital assets bought on or after the closing of the offering. Excluded were MicroStrategy's existing bitcoins and bitcoins and digital assets purchased with the proceeds from those existing bitcoins.

The company's cumulative interest payment obligation for the total debt is around $35 million per year through 2028, according to its financial filings. Based on MicroStrategy's historical financials, it appears that the company should be able to handle those interest payments. MicroStrategy's earnings before interest, taxes, depreciation, and amortization (EBITDA) last year were around $82 million, according to data from MarketWatch.

But what about the principal repayment of over $2 billion? Can MicroStrategy pay off its debt in case the convertible notes don't get converted into equity?

Investors in the convertible notes won't be able to convert them to equity if MicroStrategy shares never trade at or above the conversion price — the price per share at which the notes can be turned into equity when they mature.

MicroStrategy's first ($650 million) tranche of convertible notes, due on December 15, 2025, has a conversion price of $397.99 per share. The second ($1.05 billion) tranche of convertible notes, due on February 15, 2027, has a conversion price of $1,432.46. At the time of publication, MicroStrategy's share price was around $650.

The first batch of notes ($650 million) will likely be converted into equity because the company's current share price is well above the conversion price, according to Michael Kao, a retired hedge fund manager with extensive experience in capital structure arbitrage. But the second ($1.05 billion) batch is a "very busted piece of paper," he says.

It's hard to see how the stock price will reach the $1,432 conversion price, Kao argues. This, he says, is because even when bitcoin's price topped $63,000 in April of this year, MicroStrategy's share price never rose above $900. Kao says that if bitcoin's price were to fall any time before the company's debt matures, the consequences could be dire for MicroStrategy.

According to Kao's calculations, if bitcoin's price fell below $15,000 at any time before the convertible notes mature, then it will become a "real problem" for the firm. "That's the level where the loss from MicroStrategy's bitcoin holdings exceeds its total debt," he says. 

Saylor doesn't see it that way. "There is no particular bitcoin price point that would trigger any action or requirement on our part," he said in a message to The Block. "Most of our debt is convertible bonds, unsecured, with no covenants. The bitcoin is not pledged as collateral for those bonds, so the BTC price would be irrelevant."

If the two convertible notes don't get converted to equity, "the company has many options at its disposal," said Saylor. He did not respond to a follow-up question about what specific options he meant.

Jeff Dorman, chief investment officer at crypto asset management firm Arca, says that if bitcoin's price falls below $15,000, it won't necessarily be a problem — as long as MicroStrategy is solvent and can pay its corporate and interest expenses. "And that is not in question," he says.

"But if the concern is how the company will refinance its maturities, the same question applies to every high yield-rated bond issuer," says Dorman. "Investors will either allow them to refinance with new debt, or they will push them into bankruptcy and fight other creditors for the rights to the assets."

Dorman says that if MicroStrategy is unable to repay the principal with cash on hand, it can always look for other suitable options as needed. Those could include selling its core software business, issuing equity, or raising more debt, he says.

People are "overly concerned" about what MicroStrategy is doing "just because bitcoin is a polarizing topic," Dorman says.

Number go up?

At the core of the debate is MicroStrategy's stock price, since its trading price determines whether the convertible notes will be converted into equity or have to be repaid.

A common way to compare where the company trades relative to its peers is by looking specifically at the ratio of the company's "enterprise value" (EV) — a measure of a company's total value, calculated as the market capitalization plus debt, minus total cash and cash equivalents — to EBITDA.

According to FactSet, MicroStrategy currently trades at over 100 times EV/ EBITDA. That's much higher than peers Salesforce, Microsoft, SAP, Oracle, and IBM.

Kao argues that the company's share price is trading at a high premium and that, for this reason, it should raise $1 billion through a stock issuance and retire its debt.

"That (retiring debt) would be a slam dunk genius move, but MicroStrategy won't do that," he says.

MicroStrategy did file a so-called shelf registration in June — which would allow it to sell certain securities to the public — to raise up to $1 billion.

"We intend to use the net proceeds from this offering for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement," the company said in the filing.

The company's gains from its bitcoin investment have increased MicroStrategy's value in the eyes of investors. The company's enterprise value is over $9 billion when including its bitcoin holdings at current prices, according to FactSet — compared with around $5 billion when the bitcoin holdings are excluded. People appear to be buying the stock for the bitcoin tracker.

"MicroStrategy investors know that they own a BTC tracking stock," says Dorman. "If you invest in MicroStrategy and bitcoin goes lower, you should expect the stock to go lower. That's fairly obvious at this point."

In all, MicroStrategy's future appears to depend on the price of bitcoin. If bitcoin keeps rising and reaches $100,000 or $200,000, then Saylor is going to look like "the biggest genius of all time," says Kao.

© 2026 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.