tl;dr
S&P Global downgraded Bitcoin-backed Strategy Inc. to 'B-', citing risks from extreme Bitcoin concentration, limited diversification, and liquidity issues. While the company's $74 billion Bitcoin treasury is a key asset, its USD-denominated debt and volatile market exposure pose significant threats....
**S&P Global Slashes Credit Rating of Bitcoin-Backed Strategy Inc. to "B-" Amid Volatility and Liquidity Concerns**
S&P Global Ratings has downgraded Strategy Inc., the company formerly known as MicroStrategy, to a "B-" credit rating, marking it as a "junk" level issuer. The agency cited the firm’s extreme reliance on Bitcoin, limited business diversification, weak capitalization, and low U.S. dollar liquidity as critical risks that could jeopardize its financial stability.
**Bitcoin Concentration as a Double-Edged Sword**
Strategy Inc. has become a symbol of corporate exposure to Bitcoin, holding 640,808 BTC in its treasury—a valuation of approximately $74 billion, making it the largest Bitcoin-holder among publicly traded companies. However, this singular focus has drawn scrutiny. S&P analysts noted that the company’s “concentration in Bitcoin is key to its strategy” but warned that this approach introduces significant volatility and liquidity risks.
The firm’s financial structure exacerbates these risks. While its Bitcoin holdings act as a hedge against U.S. dollar depreciation, its debt and preferred equity obligations are denominated in USD. This creates a “currency mismatch,” leaving the company vulnerable during market downturns. S&P described the strategy as “prudent” for managing near-term debt maturities—Strategy has no major USD liabilities due in the next 12 months—but cautioned that a market stress event could force the company to sell Bitcoin at “depressed prices.”
**Capital Markets as a Lifeline**
Despite the risks, S&P acknowledged Strategy’s robust access to capital markets as a key strength. The company’s stock, which has surged in tandem with Bitcoin’s price this year, now carries a market capitalization of nearly $80 billion. Strategy has also raised over $15 billion in convertible debt and preferred equity, allowing it to meet obligations without liquidating its Bitcoin reserves.
However, the firm’s financial health remains precarious. In the first half of 2025, Strategy reported a negative $37 million cash flow from operations, with its modest software business barely breaking even. Nearly all of its $8 billion in pre-tax earnings came from unrealized gains tied to Bitcoin’s price appreciation, not from sustainable revenue or cash-generating operations.
**Balancing Vision and Market Realities**
Michael Saylor, Strategy’s co-founder and chairman, hailed the S&P rating as “the first-ever rating of a Bitcoin treasury company,” positioning the firm as a pioneer in crypto-backed corporate finance. Yet the junk rating underscores the skepticism of traditional credit markets toward Bitcoin-centric business models.
Despite warnings from skeptics like economist Peter Schiff, Strategy continues its aggressive Bitcoin accumulation, recently purchasing $43.4 million worth of the asset. As the company prepares to release its third-quarter earnings on October 30, investors will closely monitor its cash flow resilience and balance sheet management.
**Looking Ahead**
While Strategy’s bold bet on Bitcoin has redefined corporate finance, S&P’s downgrade highlights the challenges of operating in a market where crypto assets remain volatile and illiquid. For now, the company’s survival hinges on its ability to navigate these risks while maintaining investor confidence in an increasingly polarized financial landscape.