If MicroStrategy Fails, Can the Chain Reaction Destroy Bitcoin in 2026?

Strategy (MicroStrategy) currently owns the largest corporate Bitcoin assets in the world with 671,268 BTC — more than 3.2% of all Bitcoin in circulation. This position creates unprecedented systemic risks within the crypto ecosystem. If this entity were to collapse, the consequences could surpass the impact of FTX in 2022. Why is this threat real, what are the potential triggers, and how deep could the resulting crater be?

Leveraged Bitcoin Bets That Are Unstable

MicroStrategy’s corporate identity has become fully tied to Bitcoin. The company has invested over $50 billion in BTC accumulation, mostly financed through debt and new equity issuance. Meanwhile, its original software business only generates $460 million per year — a figure that seems small compared to the total exposure.

By December 2025, MicroStrategy’s stock trades at a significant discount to the value of its Bitcoin holdings. The company’s market capitalization reaches around $45 billion, while the Bitcoin held is valued at $59-60 billion. Investors apply this discount due to concerns about liquidity, debt burden, and business sustainability.

The average cost basis of Bitcoin held is $74,972, with most recent purchases made when prices approached peaks in the last quarter of 2025. Over 95% of the company’s valuation depends solely on Bitcoin price movements.

With BTC currently at $90.49K, the safety margin continues to thin. When Bitcoin drops 20% since October, MSTR’s stock losses more than double in the same period — indicating extreme leverage effects.

Failure Mechanism: From Stress to Collapse

MicroStrategy funds its Bitcoin expansion through aggressive financial instruments: issuing common stock, creating new preferred shares, and convertible debt. Total guaranteed debt reaches $8.2 billion, while preferred stock commitments exceed $7.5 billion.

The annual financial burden from these instruments amounts to $779 million in interest and dividends. At current Bitcoin levels, if the asset falls below $13,000 — an extreme but not impossible scenario given BTC’s historical volatility — the company would face insolvency.

History shows that a 70-80% decline in Bitcoin is not unusual. If a major downturn occurs alongside market liquidity tightening or volatility triggered by ETF movements, pressure on MicroStrategy could become unbearable.

The company has pledged not to sell its Bitcoin, but this commitment only holds as long as it can raise operational funds. MicroStrategy’s cash reserves at the end of 2025 reach $2.2 billion — enough for two years of bond payments. However, if Bitcoin drops sharply and capital markets close, this buffer could vanish quickly.

Domino Effect: When One Failure Triggers a Chain Reaction

Unlike FTX, which was a centralized exchange, the failure impact of MicroStrategy could be more systemic. The company owns more Bitcoin than almost all non-governmental entities in the world.

If MicroStrategy is forced to liquidate or if markets start pricing in its failure risk, the following scenarios could occur:

• Forced Sale: If the company runs out of cash and cannot convert other assets, millions of Bitcoin could flood the market simultaneously, driving BTC prices down sharply.

• Negative Feedback Loop: Falling BTC prices reduce collateral value, accelerating margin calls, which trigger further sales, further depressing prices — creating an unstoppable spiral.

• Loss of Confidence: The failure of the largest corporate player could shift public perception of Bitcoin’s viability as a valuable asset. Panic selling could spread to retail and institutional investors.

• ETF Impact: If Bitcoin drops 40-50 due to this event, Bitcoin ETFs, which are primary tools for institutional investors, could experience massive outflows, adding additional pressure.

Currently, some market indices are considering removing MSTR from their portfolios due to its complex structure and high risk. If this happens, passive outflows could reach billions of dollars.

Probability and Timeline of the Risk

While uncertain, trends indicate increasing risk. MSTR shares have fallen 50% this year, with (Net Asset Value premium/discount) below 0.8×. Institutional investors are increasingly shifting to simpler, cheaper Bitcoin ETFs.

If Bitcoin falls below $50,000 and stays there, MicroStrategy’s market valuation could drop below its debt load. At that point, access to capital markets would dry up, forcing painful decisions: forced asset sales or deep restructuring.

The probability of complete failure by 2026 is estimated at 10-20%, depending on Bitcoin volatility, market liquidity conditions, and investor sentiment shifts.

However, if it occurs, systemic damage could far surpass the fall of FTX many times over. FTX was an exchange; MicroStrategy is a holder of critical assets. The flood of Bitcoin into the market from forced liquidation is not just a threat to one player but to trust and fundamental prices of the entire crypto asset class.