April Rally for Strategy? Shares Surge 37%, Yet Weakness Becomes More Evident

In mid-April, Bitcoin rebounded from $65,700 and reached a high above $78,000, turning the company's massive holdings—previously accumulated at an average price of approximately $75,600 per coin—into paper profits. Meanwhile, the recovery in risk appetite triggered by the de-escalation of U.S.-Iran tensions on April 17 further drove a collective rally in crypto assets.

Strategy's latest disclosure revealed that it spent $2.54 billion last week to purchase 34,164 bitcoins at an average cost of approximately $74,395, marking its largest single-week buying record since November 2024.

With this, Strategy's total Bitcoin holdings have increased to approximately 815,061 coins, officially surpassing BlackRock's IBIT holdings of about 802,823 coins to become the world's largest institutional Bitcoin holder. While BlackRock operates in asset management, holding assets on behalf of its users, Strategy functions as a leveraged proprietary firm, and therefore sees significantly more pronounced gains from Bitcoin's appreciation.

Although the Bitcoin rally caused the stock price to recover significantly in April, the "darkest hour" Strategy experienced in the first quarter has not been completely erased.

According to company disclosures, for the first quarter ended March 31, the digital assets held by Strategy recorded an unrealized loss of approximately $14.5 billion, as Bitcoin fell by more than 20% during the quarter, marking its worst first-quarter performance since 2018.

As the first full quarterly earnings report since the company switched to fair value accounting, this massive loss will be directly reflected in the income statement, significantly amplifying reported volatility. Regarding the holding structure, as of April 6, Strategy held a total of 766,970 Bitcoins with a cumulative investment cost of approximately $58.02 billion, representing an average cost basis of $75,644 per coin.

Based on the current Bitcoin price of approximately $76,000, the overall position remains on the edge of the break-even point.

[Source: Strategy; Note: mNAV is the ratio of the company's market capitalization to the market value of its Bitcoin holdings, reflecting the premium the market is willing to pay.]

At the same time, the mNAV premium—Strategy's core financing leverage—is undergoing a systematic collapse. mNAV refers to the ratio between the company's market capitalization and the value of its Bitcoin holdings; during its peak in 2024, it exceeded 2.4x, which the company used to secure a continuous stream of funding by issuing new shares at a premium.

Current mNAV has significantly compressed from its peak. According to disclosures from Strategy, the current mNAV stands at 1.28, having dropped below 1.0 in February. When mNAV approaches 1.0, the arbitrage logic of increasing Bitcoin holdings through equity financing effectively fails, and the company's expansion engine is essentially stalling.

As the premium window closed, Strategy was forced to shift toward high-cost preferred stock financing on a large scale. The dividend yield on perpetual preferred stock, represented by STRC, has reached a staggering 11.5%. Even with approximately $2.25 billion in cash reserves, the cash flow safety cushion is being rapidly depleted as the company must pay at least $1.1 billion in high annual dividends.

Even as the company proceeds with changing dividend payments from monthly to semi-monthly, the 11.5% annualized fixed cost remains an unavoidable cash drain.

Currently, Strategy's performance is highly positively correlated with Bitcoin. Given existing geopolitical conflicts and global central bank tightening policies, the likelihood of Bitcoin—a high-beta risk asset—continuing to rise is not high.

In a context where Bitcoin fails to show broad strength, the dissipation of Strategy's previous premium and ongoing high dividend cash outflows are eroding shareholders' equity. Should Bitcoin fail to sustain its current gains or even turn downward, this facade of fragility could face the risk of collapse.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.