MSTR Cat

Blockchain/Level VII · Evolution/7.3 Booms, busts and institutions/Lesson 5

Strategy and the claims on bitcoin

The balance sheet as a vault, and the layers of custody between holder and chain

MaterialsA spreadsheet with columns for Company, Date, Amount (BTC), Funding SourceAccess to a financial data terminal or SEC EDGAR databaseA calculator for computing ratios of holdings to market capA block explorer interface

Wonder

  1. Why would a software firm with stable cash flows buy an asset that swings wildly?
  2. How does issuing convertible debt to buy bitcoin change the risk profile for existing shareholders?
  3. What happens to a company’s valuation when its stock price diverges from the market value of its digital reserves?

Explore

    Part ICorporate treasuries: MicroStrategy to Strategy

  1. Corporate treasuries historically prioritize principal preservation. Cash is parked in bank deposits, treasury bills, or money-market funds to ensure operational continuity. The objective is stability, not appreciation. Bitcoin’s fixed supply schedule and volatility present a distinct proposition: it functions as a reserve asset for those seeking exposure to digital scarcity rather than liquidity safety.
  2. MicroStrategy began this transition in August 2020. Michael Saylor led the purchase of 21,454 BTC for $250 million, designating it a treasury reserve asset. The company continued acquiring bitcoin, funding purchases through convertible bonds and share sales. In February 2025 MicroStrategy renamed itself Strategy; by then it was by far the largest corporate holder of bitcoin.
  3. Other firms adopted similar tactics with varying results. Square (now Block) purchased $50 million in bitcoin in October 2020. Tesla bought $1.5 billion in early 2021, a move that drew significant attention, but sold most of its holdings in 2022. These actions demonstrated that public companies could hold or dispose of digital assets without immediate shareholder revolt, though the exit strategy remained distinct from MicroStrategy’s accumulation thesis.
  4. The funding mechanism introduces leverage. By issuing convertible bonds to buy bitcoin, a company creates a debt obligation tied to an asset with no intrinsic cash flow. If the share price rises above the bonds’ conversion price, bondholders convert into shares, diluting existing holders; if it falls, the debt must be repaid or refinanced, which can force hard choices in a downturn. Either way, shareholders hold a leveraged position on bitcoin.
  5. From 2025 Strategy added a new kind of funding: perpetual preferred stock, which pays investors a fixed or variable dividend and never matures. It issued STRK (January 2025), STRF (March), STRD (June), the variable-rate STRC (July) and the euro-denominated STRE (November), and used the proceeds to buy more bitcoin. By 4 October 2026 it held 848,000 BTC, bought for about $64 billion. Dozens of imitators, ‘bitcoin treasury companies’, appeared worldwide.
  6. A treasury company’s shares can trade above or below the value of its bitcoin; the ratio between the two is called mNAV. For years Strategy’s premium let it sell shares and still add bitcoin per share. In late June 2026 its enterprise mNAV fell below 1 for the first time, and that summer it sold some bitcoin to help fund preferred dividends. Shareholders get bitcoin exposure through an equity, but carry dilution, dividend obligations and leverage. Tokenized versions of its shares now trade on-chain (lesson 7.3.5).

    7. Part IIClaims on bitcoin: ETFs, Strategy and tokenized shares

  7. MicroStrategy began accumulating Bitcoin in August 2020, repurposing its software business into a corporate treasury. By renaming itself Strategy in 2025 and holding 848,000 BTC by October 2026, it demonstrated that public equity markets could fund direct coin purchases. It finances purchases mainly by selling its common stock at market, along with convertible debt and perpetual preferred stock, effectively leveraging the balance sheet to hold assets it does not mine.
  8. US spot Bitcoin ETFs received approval in January 2024, creating a regulated custodial layer for institutional capital. By October 2026, these funds held approximately 1.29 million BTC, with BlackRock’s IBIT accounting for roughly 805,000. This structure offers convenience and regulatory clarity but introduces counterparty risk: the investor holds a share in a fund that controls the keys, not the coins themselves.
  9. Tokenized shares like MSTRx bring corporate treasury exposure back on-chain as digital assets. MSTRx is a claim on Strategy shares held in custody, which are themselves a stake in a company that holds bitcoin: two steps from the coin. As a token it can circulate on-chain and pair with other assets. This layer adds composability but also distance from the actual coin; the holder trusts both the issuer of the token and the custodian of the underlying asset.
  10. Each layer—corporate treasury, ETF fund, or tokenized share—adds a claim held by someone else. Convenience increases with each step away from self-custody, but so does counterparty risk. If Strategy defaults on its debt, if an ETF custodian fails, or if a token contract is compromised, the holder’s access to the underlying Bitcoin may be impaired despite the coin remaining secure on-chain.
  11. The tension between accessibility and sovereignty defines this era. Institutional adoption brings liquidity and legitimacy but concentrates custody in regulated entities. ‘Not your keys, not your coins’ remains the technical test: without control of the private key, one holds a financial claim rather than the asset itself. This trade-off is fundamental to how Bitcoin integrates into traditional finance.
  12. Open an analytics site that labels institutional wallets and find the addresses attributed to a spot-ETF custodian; such attributions are estimates, not official. Note how rarely those coins move. This static holding represents a significant portion of Bitcoin’s circulating supply, locked in institutional custody.

Key facts

  • MicroStrategy purchased 21,454 BTC in August 2020 as its initial treasury reserve.
  • Tesla acquired $1.5 billion in bitcoin in early 2021 and sold most of it in 2022.
  • Square (Block) bought $50 million worth of bitcoin in October 2020.
  • MicroStrategy renamed itself Strategy in February 2025.
  • From 2025 Strategy also funded purchases with perpetual preferred stock (STRK, STRF, STRD, STRC, STRE).
  • Strategy held 848,000 BTC on 4 October 2026; its enterprise mNAV first fell below 1 in late June 2026.
  • Strategy (formerly MicroStrategy) held 848,000 BTC by October 2026.
  • US spot Bitcoin ETFs held approximately 1.29 million BTC by October 2026.
  • BlackRock’s IBIT fund accounted for roughly 805,000 BTC of the total ETF holdings.
  • Tokenized shares like MSTRx represent on-chain claims to corporate treasury assets.
  • Each custodial layer adds counterparty risk between the holder and the underlying coin.
  • ‘Not your keys, not your coins’ distinguishes self-custody from financial claims.

Exercise nine, six, three, one

9CollectList 9 public companies that have disclosed bitcoin holdings in their financial filings. Note the year of acquisition and the stated rationale from their reports.
6ClusterGroup these 9 companies into 6 by how they fund their purchases.
3DistillReduce these 6 groups to 3 distinct risk profiles for shareholders regarding dilution and leverage.
1CrystallizeWrite one sentence explaining the difference between holding bitcoin directly and holding it through a leveraged corporate treasury structure.

Fact check

Dates, figures and claims checked against the published sources listed below.

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