The Cracks in the Bitcoin Treasury Model: Is MicroStrategy Sustainable?

The Bitcoin treasury model, once hailed as a revolutionary approach to corporate asset management, is showing signs of strain. MicroStrategy, now rebranded as Strategy , has become both a pioneer and a cautionary tale in this emerging paradigm. By allocating 98% of its total assets to Bitcoin—holding 632,457 BTC as of August 2025—the company has redefined corporate treasury strategy. Yet, its aggressive capital-raising tactics, governance shifts, and exposure to mark-to-market volatility raise critical questions about long-term sustainability.

Governance Challenges: From Centralized Control to Shareholder Tensions

Strategy’s governance structure has evolved dramatically since 2023. CEO Michael Saylor’s initial dominance—51.7% voting control in 2024—has eroded to 45.2% by 2025 due to dilution from $42 billion in equity and debt financing. This shift forced compliance with NASDAQ rules, leading to the formation of independent governance committees, including a nominating committee led by Carl J. Rickertsen [4]. While this decentralization aims to align with shareholder interests, Saylor’s continued advocacy for Bitcoin accumulation has created friction. His influence, though diminished, still clashes with a board increasingly focused on risk mitigation and capital preservation [4].

Legal scrutiny further complicates governance. Class-action lawsuits allege that Strategy misled investors by downplaying risks associated with its Bitcoin strategy and using opaque accounting practices to inflate financial results [3]. The adoption of FASB ASU 2023-08, which mandates mark-to-market valuation for crypto assets, exposed a $5.91 billion unrealized loss in Q1 2025, triggering a stock price collapse [3]. These governance and legal challenges highlight the fragility of a model reliant on volatile assets and aggressive leverage.

Valuation Risks: Mark-to-Market Volatility and Tax Exposure

The shift to mark-to-market accounting has amplified Strategy’s financial instability. Previously, Bitcoin gains were hidden under a cost-less-impairment model that only permitted write-downs. Now, every price fluctuation directly impacts its balance sheet. For example, a $1 billion overnight loss in 2024 underscored the risks of holding a leveraged, non-income-generating asset [1]. This volatility is compounded by potential tax liabilities under the Inflation Reduction Act’s Corporate Alternative Minimum Tax (CAMT), which could impose a 15% tax on unrealized gains if Strategy’s Adjusted Financial Statement Income (AFSI) exceeds $1 billion for three consecutive years [3]. While the IRS has not yet mandated taxation on unrealized gains, the uncertainty creates a regulatory overhang.

Shareholder Conflicts and Market Saturation

Shareholder trust has eroded as Strategy’s capital-raising strategy evolved. The company initially pledged not to issue shares below a 2.5x mNAV threshold to avoid dilution. However, in August 2025, it reversed this policy, allowing issuance between 2.5x and 4x mNAV—and even below 2.5x under certain conditions [1]. This reversal sparked accusations of broken trust, with the mNAV ratio itself declining to 1.57, far below its 3.4 peak [1]. A shrinking premium reduces Strategy’s ability to raise capital, creating a self-reinforcing cycle of dilution and falling stock prices.

The broader market is also becoming saturated. Smaller firms adopting Bitcoin treasury strategies lack the liquidity and scale to replicate Strategy’s success. If Bitcoin prices drop sharply, these companies could face distress, further destabilizing the model [1].

The Sustainability Debate

Despite these risks, some investors remain bullish. Strategy’s disciplined capital allocation and strategic leverage have historically outperformed both Bitcoin and traditional equities, with its stock surging 3,000% over five years compared to Bitcoin’s 1,000% growth [5]. However, this success hinges on continued Bitcoin appreciation and regulatory clarity. The approval of spot Bitcoin ETFs and the CLARITY Act has normalized institutional access to crypto, but regulatory shifts could just as easily disrupt the model [2].

In the long term, Strategy’s sustainability will depend on its ability to balance governance transparency, tax compliance, and market dynamics. While its Bitcoin-centric approach has redefined corporate treasury management, the cracks in its model—governance conflicts, valuation volatility, and shareholder distrust—pose existential risks.

Source:
[1] MicroStrategy's Bitcoin Premium Sinks Amid Shareholder Skepticism
[2] Decentralized Governance and the Rise of Bitcoin Treasuries
[3] MicroStrategy's Bitcoin Gamble Exposes Corporate Governance Crisis
[4] Corporate Governance Risks in High-Growth Tech Firms
[5] The Bitcoin Treasury Model Is Breaking, but Strategy's Isn't—Here's Why