Bitcoin Drops 21% After Strategy Debt Buyback: Doom Loop Next?

Key takeaways: Strategy faces tighter short-term liquidity, but its conservative 11% net leverage protects it from forced BTC liquidations. A Bitcoin rally above $70,000 remains unlikely as long as STRC trades under $100 and spot ETFs show net selling pressure.

Bitcoin (BTC) took a 21% haircut over 10 days, sliding back to the $61,000 level for the first time in four months. The timing was, of course, immaculate—it lined up with Strategy (MSTR US) deciding to buy back some corporate debt and temporarily pause its Bitcoin accumulation. Traders are now sweating bullets, worried that Strategy might be forced to dump some of its BTC.

Strategy (MSTR US) Bitcoin reserve changes & average price. Source: Strategy

Strategy had been the largest known Bitcoin buyer, stacking 126,016 BTC for $9.31 billion since March. But the company used $1.38 billion of cash—raised from recent equity issuances—to buy back some of its convertible debt. The decision, announced on May 15, conveniently coincided with the Stretch preferred stock (STRC US) drifting away from $100.

Strategy Series A Perpetual Stretch preferred stock (STRC US). Source: TradingView

STRC is a clever little instrument. It lets Strategy issue new shares whenever the price hits $100, and holders get a variable dividend currently set at 11.5% annually, paid monthly in cash. If traders decide $100 is no longer the vibe, new buyers show up at lower levels—effectively demanding a higher dividend. So on paper, this should be a non-event for Strategy's risk profile.

Strategy raised $7.5 billion through preferred stock issuances in the first five months of 2026, which was a meaningful tailwind for Bitcoin's price. Now, however, the company is in a tighter spot, with its cash position reduced to $900 million—enough to cover dividends for about six months.

Strategy (MSTR US) financial highlights. Source: Strategy

Strategy's 11% net leverage is the number to watch, since it represents the company's debt relative to its assets. Even at a hypothetical $30,000 Bitcoin, the coverage from its BTC holdings looks conservative by any sane standard.

So will Strategy be forced to liquidate some Bitcoin? Short-term liquidity has clearly deteriorated, but there's no contractual floor in Strategy's convertible debt that would trigger a BTC reserve sale. The company is also free to sell MSTR stock at a discount to its market-adjusted net asset value. If debt markets are off the table, diluting current MSTR holders is always an option. Whether the market reads that move as weakness and piles on MSTR and STRC is a separate problem—the leverage ratio would still look solid.

Related: Saylor downplays Bitcoin slide as Strategy faces $11B paper loss

According to X user zeroxkyle, author of the "Grand Line" newsletter, any eventual Bitcoin sale from Strategy would only accelerate the price drop, making liquidity conditions worse. The analysis describes a "doom loop" where buyers sit on their hands out of fear that a massive seller might enter the market at any moment. It's hard to say what would calm investors down, since Strategy isn't facing any imminent forced sale. The preferred stock dividends can be paused at will, though they just pile up for later.

Still, as long as STRC keeps trading under $100 and spot exchange-traded funds (ETFs) remain net sellers, the odds of a Bitcoin rally above $70,000 are about as slim as a Terra Luna recovery roadmap.