MicroStrategy Bitcoin strategy faces a dilemma, industry warns that the risk of a "death spiral" is increasingly imminent

Against the backdrop of Bitcoin (BTC) prices continuing to face downward pressure, MicroStrategy’s aggressive betting strategy is raising market concerns. According to the latest market data, BTC is priced at $95.41K, with a 24-hour decline of -2.29%. The challenges faced by this publicly listed business intelligence company are also intensifying.

Hidden Risks in the Preferred Stock Financing Model

Recently, MicroStrategy has been accumulating Bitcoin on a large scale through issuing preferred stocks, a move that has become a focal point in the industry. Renowned economic commentator Peter Schiff has sharply criticized this model. He pointed out that the company’s operational logic has fundamental flaws—this model can only be sustained if income-driven funds continuously purchase high-yield preferred stocks.

According to Schiff’s analysis, if the promised returns cannot be realized as scheduled, institutional investors will choose to exit, thereby cutting off the company’s subsequent financing channels. In his view, this is the trigger mechanism for a “death spiral.” The so-called death spiral refers to a self-reinforcing negative cycle: financing is blocked → stock supply is limited → investor confidence collapses → further capital outflows.

Market Performance and Risk Warnings

Although some voices within the community defend MicroStrategy, arguing that preferred stocks are merely a fundraising tool for Bitcoin reserves and unrelated to the company’s fundamentals, professional investment analyst Don Kwok has raised more substantial risk indicators.

The key issue is: MicroStrategy’s stock (MSTR) has fallen below its net asset value (NAV). This means the company’s market valuation is now lower than the book value of its Bitcoin holdings, which is a dangerous signal in financial history. MSTR’s stock price has dropped over 50% in the past six months, further exacerbating investor concerns.

Kwok warns that the company’s business model essentially relies on trading stock premiums over NAV. Once this breaks, new stock issuance will cause additional dilution—the proportion of equity lost will exceed the value of the Bitcoin obtained, creating a negative-sum game. If the market continues to decline, this vicious cycle could evolve into systemic risk.

Macro Background and Investor Expectations

Schiff emphasizes in his commentary that Bitcoin has fallen about 40% from its all-time high, whereas gold remains near its historic high of $4,000. He uses this to support his long-standing view that precious metals outperform cryptocurrencies and questions what value MicroStrategy can actually provide to investors in the absence of sustainable earnings.

Behind this industry controversy, there is essentially a reassessment of aggressive leverage strategies. When market sentiment reverses, business models that rely on continuous financing are often the first to be affected.