Bitcoin fell 21% in 10 days, retesting the $61,000 level not seen in four months. The trigger: Strategy (NASDAQ: MSTR) abruptly pivoted from buying bitcoin to spending $1.38 billion on its own convertible debt buyback. Market sentiment flipped from "strongest buyer" to "potential seller," stoking fears of a doom loop similar to the 2022 Terra Luna collapse.
Strategy's Pivot: From Top BTC Buyer to Debt Retire
Since March, Strategy accumulated 126,016 BTC for $9.31 billion. But on May 15, the firm announced it would use proceeds from recent equity offerings for a $1.38 billion debt repurchase, halting new BTC purchases. Meanwhile, Strategy's Stretch preferred stock (STRC) slid below the $100 psychological threshold, amplifying liquidity anxiety.
STRC carries a unique structure: when shares trade at $100, Strategy can issue new shares at par and pay an 11.5% variable dividend monthly. Below $100, new buyers lock in lower entry prices — effectively demanding higher yields. While this shouldn't technically alter Strategy's risk profile, markets read it as "slowing funding."
Cash Down to $900M — How Long Can It Last?
Strategy raised $7.5 billion from preferred stock in the first five months of 2026, a key pillar supporting BTC. But its cash position has shrunk to $900 million — enough to cover only six months of preferred dividends. Net leverage stands at 11%, meaning even if BTC drops to $30,000, its holdings would still cover debt. Still, short-term liquidity constraints persist.
Doom Loop Shadow: Echoes of Terra Luna
X user and Grand Line Communications author zeroxkyle warned that forced BTC sales by Strategy would accelerate price declines, worsening liquidity. This mirrors the doom loop concept: fear of a large seller deters buyers, triggering price drops that force more selling. The 2022 Terra Luna crash saw exactly such a spiral. Now, markets worry Strategy's potential BTC unloading could replay that script.
Strategy has no contractual obligation to sell BTC, nor restrictions on selling MSTR at a discount. But deteriorating liquidity is alarming, especially amid persistent spot ETF outflows, weak STRC pricing, and BTC hovering at $61K. Key signals to watch: Strategy's cash burn rate, STRC price action, daily BTC ETF flows, and any signs of other major holders liquidating. These will determine whether this correction is a buying opportunity or the start of a prolonged bear phase.