How Strategy cornered the Bitcoin market but lost the equity war

In 2025, Strategy (formerly MicroStrategy) executed a capital markets feat that effectively cornered the supply of new Bitcoin, purchasing more coins than the global mining network produced for the entire year.

Throughout the year, Strategy added approximately 225,027 BTC to its corporate treasury, bringing its total holdings to roughly 672,497 BTC. This purchasing campaign exceeded the estimated post-halving issuance of 164,000 coins, creating a mathematical supply shock.

Yet, the company enters 2026 facing a stark market reality: its stock price has halved, decoupling violently from the very asset it hoards.

Data from Strategy shows its shares plummeted 52% over the final three months of the year, ending with a market capitalization of $48.3 billion. This is significantly less than the $59.2 billion market value of its bitcoin holdings.

This divergence is not merely a shift in sentiment; it represents the unwinding of a specific structural trade and a ruthless re-evaluation of the company’s leveraged capital structure.

As 2026 begins, the narrative has shifted from Strategy as a premium-priced proxy to a complex battleground where short sellers, arbitrageurs, and debt obligations weigh heavier than the “super-cycle” thesis.

The arbitrage unwind and short interest

For much of the previous cycle, Strategy traded at a significant premium to the net asset value (NAV) of its holdings.

This premium existed because investors treated the stock as a leveraged volatility instrument. Hedge funds and proprietary trading desks monetized this by putting on the “MSTR arbitrage” trade: buying the stock and shorting bitcoin futures to harvest the volatility premium.

However, that dynamic inverted in 2025 as the company flooded the market with equity to fund its 225,000-coin haul, resulting in the collapse of the premium.

Consequently, sophisticated market participants began unwinding the premium trade or entering a new structure: going long spot bitcoin via ETFs and shorting Strategy stock to capture the narrowing spread.

Market data confirms the intensity of this battle. As of Dec. 15, Strategy carried a short interest of 29.14 million shares, representing 11.08% of its public float, according to Marketbeat data.

While this marks a 4.62% decrease from November, Strategy remains one of the most shorted stocks in the market.

The persistent short interest indicates that a significant cohort of the market is betting against the company’s ability to maintain its valuation premium amidst heavy dilution.

This structural pressure explains why the stock failed to rally even as Bitcoin held near $87,983 despite the significant headwinds its faced.

The market moved from viewing Strategy as a scarcity play to viewing it as a mechanism for dilution. An implied volatility of 71% further underscores the anxiety, pricing the equity not as a stable holding company but as a high-octane derivative.

The debt reality vs. the ‘discount’

A critical error in simple retail analysis has been comparing the market cap directly to the Bitcoin stack and labeling the difference a “discount.”

As of press time, the firm’s Bitcoin reserve was valued at $59.2 billion, while the market capitalization stood at just $48.3 billion. To the casual observer, the stock appeared to be trading at a nearly $11 billion discount to its gross assets.

However, institutional analysis takes a harder line, focusing on Enterprise Value (EV) to account for the company’s massive debt load. When adjusted for the billions in convertible notes used to fund this accumulation, the picture changes.

The company’s Enterprise Value stood at $62.3 billion at year-end, which is roughly $3 billion higher than the value of the BTC stack.

This spread reveals that once debt obligations are factored in, the “free money” discount evaporates.

Essentially, the market is pricing the company at a razor-thin multiple of its adjusted net assets—reflected in its mNAV (market to Net Asset Value) of 1.05.

The market’s refusal to award a higher premium suggests investors are no longer pricing the stock based on the gross value of the coins ($59.2 billion), but are instead keenly aware that the debt ($14 billion implied difference between Market Cap and EV) has a senior claim on those assets.

The dilution engine vs. ‘BTC Yield’

The engine of Strategy’s accumulation, which has been selling stock to buy Bitcoin, faced a critical stress test in the fourth quarter.

The company relies on at-the-market (ATM) equity issuance to fund its purchases. In 2025, this “rinse-and-repeat” loop scaled the treasury to nation-state levels, but it also introduced a reflexivity trap.

Management promotes a Key Performance Indicator (KPI) known as “BTC Yield,” which measures the percentage increase in BTC holdings per share. The thesis is that as long as the company can issue shares at a premium to the cost of acquiring bitcoin, the accretion benefits shareholders.

However, the market’s focus shifted in late 2025 from “yield” to raw dilution. With the stock price down 53% over the last year, Strategy must issue more shares to raise the same amount of capital.

This increases the denominator (the share count) faster than the numerator (the Bitcoin stack) grows.

Despite this, the company has shown no signs of pivoting. Strategy has raised a cash reserve exceeding $2 billion, and management has poured cold water on any suggestion of selling bitcoin to service debt or buy back shares.

So, the commitment to the accumulation strategy is absolute, even as the equity market exacts a heavy toll.

The year ahead

Considering the above, the outlook for 2026 relies less on broad sentiment and more on the specific sensitivity of Strategy’s balance sheet to Bitcoin’s price action.

The previous “up only” correlation has broken, replaced by a complex interaction of leverage, issuance cadence, and index flows.

In a scenario where Bitcoin pushes toward $110,000, the asset gap, the difference between the coin stack and the debt-adjusted equity value, would widen significantly.

Historically, spreads of that magnitude force a repricing, as short sellers are squeezed out and value investors step in. Under these conditions, the premium could return, provided management slows the pace of issuance.

However, if Bitcoin remains in the current $80,000 to $90,000 consolidation zone, the mechanics of the ATM offering face a challenge.

Continued issuance in a flat market erodes the BTC per share, validating the skeptics who view the stock as a “noisy tracker fund” with high fees in the form of dilution.