Summary My previous Sell ratings on Strategy have worked well, but improving fundamentals and a stronger balance sheet now justify an upgrade to Hold. Strategy continues to grow Bitcoin per share while reducing debt, building its USD reserve, and gaining greater flexibility through STRC and selective Bitcoin sales. I remain long-term bullish on Bitcoin but expect another BTC downturn and MSTR mNAV compression to offer a materially better entry point later this year. Introduction My two previous “Sell” articles on Strategy Inc. (MSTR), while somewhat contrarian at the time, have aged well. The stock is down 20% and up just 10%, respectively, since publication, compared with gains of 12% and 22% for the S&P 500. These figures are based on today’s prices and therefore already include MSTR’s recent 45%+ rally. Before that rebound, the stock had fallen substantially further, in line with my expectations. SA I did not expect it to rally this heavily in August, however. MSTR is the only ever stock I have assigned a “Sell” rating to so far, which today will be upgraded to Hold given three aspects: 1. The possibility of the Bitcoin low already being in has increased. 2. I still view a lower low in Bitcoin this year as likely. 3. MSTR is well positioned to benefit from eventual upside; it does not have to be this year or next year. And I am very convinced Bitcoin will eventually appreciate. So, what has been going on this year for Strategy? Overall, the business remains intact. YTD, the firm raised $17B and generated almost 30K of Bitcoin gain, letting BTC per share ((BPS)) appreciate by around 6% (July 2026 vs. July 2025). On a quarterly comparison, total Bitcoin holdings increased 11% and BPS climbed 5%. The difference, of course, is due to dilution being used to attain funds to purchase Bitcoin. The 5% gain, however, is net of dilution and can therefore be interpreted as value creation within Strategy's specific business model. Further, debt outstanding went from $8.2B to $6.7B, while their USD reserve grew by $300M to $2.4B (at quarter end), whereas in the earnings call, management confirmed a USD reserve of $3.75B. At first glance, all of these numbers look like they are moving in the right direction. MSTR IR One big occurrence the market did not take lightly was Strategy's first-ever material (they did an operational test early 2026 using only 32 BTC) BTC sale, as they sold almost 3.6K BTC between the end of June and the beginning of July. Important implications, but in my view, it simply couldn't matter less in the bigger picture. As always, zooming out helps make better sense of developments, and just like this case, the dip in Bitcoin holdings is hard to even see without the numbers above the bars. MSTR IR It is merely an FUD-inducing headline, and if anything, it is bullish, as it helps MSTR buy back STRC, increase their reserve, and stay financially flexible. They will use proceeds from Bitcoin opportunistically to Buy STRC, or MSTR equity, or USD, or debt. As we can see, Bitcoin yield (change in BPS) is still positive. In bear markets, this level is much lower than during bull markets, but what is remarkable is that since 2020, Bitcoin yield has always been positive, despite taking dilution into account. The accumulation flywheel business is therefore working. MSTR IR Another bear argument is that STRC, Strategy’s key funding instrument, is still trading below its $100 par value. This matters because issuing more STRC below par would make new capital considerably more expensive and undermine the scalability of the preferred-heavy funding model. Management, therefore, made restoring STRC to roughly $99–$100 a clear priority. The dividend rate has already been raised to 12% and is set to remain there until trading around par becomes sustainable; importantly, management said that simply raising the dividend further did not prove particularly effective. Instead, Strategy has started using buybacks. By July 26, it had repurchased $28.9M of STRC's stated value for only $25M, an average purchase price of $86.53, while authorizing up to $1B in total digital-credit repurchases. Buying STRC below par is attractive because it both supports the market price and retires future dividend obligations at a discount. Management also stated that issuance can simply be reduced while STRC remains weak, rather than forcing additional supply into the market. This is something I will continue watching closely, as STRC has become increasingly important to Strategy’s capital-raising engine. However, with the now much larger USD reserve, the ability to monetize Bitcoin if necessary, and close to $1B of remaining authorized STRC buybacks at the time of the call, I do not see the current discount to par as a thesis breaker. The recent bounce makes a Q4 low less likely, but near-term downside risk remains and is my main scenario Bitcoin’s recent rebound has reduced the probability of an immediate continuation lower, but I still believe another meaningful correction later this year is more likely than not. A lot of indicators are on the verge of flipping at the moment, which will decide whether we exit the bear market or not. The strongest argument is the set of comparable four-year cycle / U.S. midterm election years. In each of the three prior comparable cycles, Bitcoin eventually formed its major bear-market low around year-end, typically in Q4. In 2014 it was January, in 2018 it was December, and in 2022 it fell in November. Following this pattern makes me believe we could bottom in October this year. Sometimes the market can be as simple as that. Still, even if we do not create a lower low, combined with my expectation for another broader risk-asset correction given the VIX seasonality (heightened volatility in October, especially in midterm years), I continue to see a retest of lower Bitcoin levels later this year as the more likely scenario. Given MSTR’s amplified exposure to Bitcoin, such a move would almost certainly translate into disproportionate downside for the stock, which could then ultimately be bought at a cheaper valuation (mNAV). mNAV compression will be a buying opportunity In the 2022 bear market, mNAV dropped all the way below 0.7 (data from SaylorTracker , based on diluted shares outstanding). I think we will sweep that low this year as well. That level would likely correlate to the low in Bitcoin, although it may occur somewhat earlier. It would be a clear buying opportunity, as during times of solid BTC performance, MSTR's mNAV will expand much above 1. At just 1.4, it would be a 2X in stock performance just from multiple expansion. Add Bitcoin price appreciation on top, and we have a great opportunity on our hands. For now, we are still at 0.83, however. SaylorTracker Strategy is as safe as it gets financially With a $3.75B USD reserve, Strategy has at least a 2-year runway to fund operations, dividends (even if they're going up), and interest obligations, and this is very conservatively estimated. It could also be longer. The risk of going bankrupt is therefore slim to none, as I expect Bitcoin to trade at higher prices than now. The BTC sale and its implications for the treasury operations should now largely be digested by the market. In the absolute worst-case scenario, MSTR can sell more Bitcoin or even equity to fund dividend and interest obligations, which decreases the stack in the near term, but the only thing that has to happen is Bitcoin eventually appreciating in price. Timing-wise, Strategy seems in the clear. Even under an extreme downside scenario (Bitcoin dropping to $4K), Strategy’s balance sheet remains highly overcollateralized. With roughly $54.8B of BTC reserves against only $3B of net debt, its current BTC coverage ratio is about 18.5x. Bitcoin could fall roughly 95%, to around $4,000, before the value of the BTC reserve would merely equal net debt. MSTR IR Conclusion I am flipping to a Hold rating as Bitcoin is showing signs of the bear market potentially ending early. I do expect MSTR's mNAV to go lower this year, but there's always a possibility BTC already found its bottom. I am highly convinced of higher Bitcoin prices in 1-3 years from here. So selling makes no sense anymore. But I also believe it is highly likely we drop quite a bit lower later this year, potentially a new low, so I cannot get myself to pitch for a Buy just yet. I will keep monitoring and covering Strategy as things develop and update accordingly. Rating: Upgrade to Hold.
