Why Strategy, Inc. Plunged in June

Shares of Strategy, Inc. (NASDAQ: MSTR) plunged 45.4% in June, according to data from S&P Global Market Intelligence.

Strategy Inc. is the brainchild of Michael Saylor, who transformed his software company into what is now essentially a Bitcoin (CRYPTO: BTC) treasury company. Strategy is also a slightly levered bet on Bitcoin, given that the company has raised additional debt to buy more Bitcoin. While Strategy isn't inordinately levered, with about $17 billion in debt and perpetual preferred stock against $51.6 billion in Bitcoin as of March 31, the company does pay a high double-digit yield on those preferred shares, paid semi-monthly.

Strategy has come under pressure this year, as the price of Bitcoin has declined. This led to some maneuvering by the company last month to pay the preferred stock dividends and service its debt. That spurred Strategy stock to fall more than the price of Bitcoin during June.

Bitcoin falls, prompting Strategy to act

Year-to-date, the price of Bitcoin has fallen about 28.5%, with a 18.4% decline in June alone.

It's hard to pin down an exact reason for the decline, though gold has followed a similar, though less severe, path, down about 4% on the year and roughly 20% since its peak in late January. Of note, Bitcoin is often described as "digital gold," touted by enthusiasts as a hedge against inflation and geopolitical turmoil.

Both commodities had risen significantly over the prior year or so heading into 2026, and each is affected by the outlook for inflation, the dollar's price, and other factors. Moreover, Bitcoin is owned by many people who invest in speculative or momentum technology plays. Therefore, as the agentic AI revolution took off in earnest this year, investors may have sold Bitcoin to fund their AI stock purchases.

It's also possible that Strategy itself contributed to the Bitcoin plunge in June. In a June 1 filing, the company disclosed that it had sold 32 BTC between May 26 and May 31, along with substantial equity sales through its at-the-market equity program, to fund the bi-monthly dividend on its preferred shares.

While representing only a tiny portion of the remaining 843,706 BTC owned as of May 31, this marked the company's first Bitcoin sales in 41 months, since December 2022. That could have sent a signal that Strategy could be a forced seller in the future, should Bitcoin continue to fall. Given that Strategy has been a large and consistent buyer of Bitcoin, short-sellers could be aggressively selling Bitcoin to force more sales from Strategy.

Late in the month, Strategy sought to stop the bleeding by disclosing an updated liquidity strategy. Under the new strategy, the company may sell some Bitcoin to partly fund a larger liquidity reserve of roughly $3.8 billion U.S. dollars, exceeding the prior reserve, to cover the company's preferred stock dividends and interest payments. Strategy also authorized a $1.0 billion share repurchase program, as well as a program to potentially repurchase the preferred stock. Likely, repurchases would only be made if these securities trade at a material discount to the stock's net asset value or the preferred stock's face value.

The new more conservative liquidity plan appeared to reassure investors somewhat, as the stock briefly recovered on the announcement.

Image source: Getty Images.

Strategy is still a levered bet on a Bitcoin recovery

It seems shareholders were encouraged by Strategy stating it would hold more liquidity than it had in the past, and that it wouldn't be so aggressive with its Bitcoin purchases. Still, Strategy will likely continue to buy Bitcoin as long as it can sell its stock above its net asset value and then buy Bitcoin for less. In fact, Strategy resumed some Bitcoin purchases later in June, despite the selling in late May.

At the very least, Strategy's commitment to hold more U.S. dollar reserves may have arrested the Bitcoin decline, as the market may not anticipate further forced selling. The price of Bitcoin rose into month-end and in early July.

For long-term Bitcoin bulls, the recent drawdown in Strategy could create a good opportunity to play a Bitcoin recovery, now that Strategy appears more conservative with its balance sheet. Still, investing in any cryptocurrency carries risks, given the intangible nature of this recently invented asset.

Billy Duberstein and/or his clients have positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.