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Pressure on bitcoin's biggest buyer, Strategy (MSTR), isn't letting up.
The company is experiencing pains as a result of its financial engineering. Starting last year, it issued a series of high-dividend preferred stocks to fund bitcoin purchases. While bitcoin (BTC-USD) prices dropped, its obligations to pay dividends only grew.
Strategy's stock fell on Thursday to its lowest level in over two years, marking a 46% drawdown for the last 30 days. Its preferred stock, which is intended to keep a price of $100, briefly fell as low as $74.
The company is trapped between a rock and a hard place. For its preferred stock to rebound, it needs to rebuild its cash pile. Yet when it sold bitcoin recently, it only rocked confidence in the cryptocurrency.
"They have a big problem," said Jeff Dorman, chief investment officer of digital asset investment firm, Arca. "They can't satisfy all parts of their capital structure."
"They're in a pickle, and they have to sell something," Fundstrat's head of digital assets Sean Farrell told Yahoo Finance.
Strategy's problem comes down to its preferred shares, a hybrid security with some bond-like features. It introduced these less typical financial instruments after relying on issuing a mix of debt and equity for years.
Read more: How to navigate a crypto meltdown
The preferred stock has security-like ownership while enticing investors with hefty dividend payments. Strategy's most popular version of preferred stock, called Stretch (STRC), offers a dividend yield of 11.5%. Total annual dividend obligations for its preferred shares have quadrupled since the start of 2026 to $1.2 billion.
The company declined to comment for the story.
Soon after bitcoin fell from its peak last October, investors began doubting whether Strategy had enough cash on hand to support its dividend payments to preferred stockholders. The company quickly set aside over a billion dollars to show it could meet those obligations.
"I think we've bottomed at sixty," Strategy CEO Michael Saylor said about bitcoin's price during a CNBC interview in late May. Days later, the company said it spent the majority of its cash reserve to pay off $1.5 billion of debt.
Bitcoin's price fell as low as $58,000 on Thursday, while Strategy's average cost per coin sits around $75,000.
According to data reported by Strategy, the company has enough cash in its reserves to pay roughly 10 months of its preferred stock obligations.
"Rebuilding the cash reserve to ~$2.8 billion (24 months of coverage) is a necessary condition" for the price of Strategy's preferred shares to recover, crypto research firm CryptoQuant wrote in a Wednesday note.
That leaves Strategy with no easy choices. The company can issue more common stock, potentially diluting existing shareholders. It can also sell some of its bitcoin holdings, which cuts against its reputation.
The least damaging move is likely for the company to continue issuing common stock, Farrell said.
Arca's Dorman, who described Strategy's predicament as "self-inflicted," said the best option is "ripping off the band-aid" by selling more of the bitcoin stash. Strategy's holdings are currently valued at $50 billion.
"Anytime you have a big problem, treating it in small doses never works," Dorman said. "The way to solve a big problem is to do a massive sale."
Farrell and Dorman warned of potential shareholder lawsuits if the dilemma gets worse.
"You should never be putting risk onto your balance sheet that has to rely on the price of something going up within a certain time frame," Farrell said.
