Bitcoin plunges 21% in 10 days, Strategy pauses buying coins to buy back debt, analysts warn: a repeat of the LUNA death spiral

Strategy pauses Bitcoin purchases and reallocates $1.38 billion to buy back corporate debt, triggering a 10-day plunge of 21% in BTC to the $61,000 level, raising market fears of a repeat of the 2022 Terra Luna death spiral.
(Background: Standard Chartered: MicroStrategy selling Bitcoin marks a turning point)
(Additional context: MicroStrategy plans to issue another $2 billion in corporate bonds to buy more Bitcoin, but corporate tax risks are increasing)

Table of Contents

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• Strategy’s pivot: from largest buyer to debt liquidation
• Only $900 million in cash remaining—how long can it last?
• The “doom loop” shadow: panic similar to Terra Luna
• Signals Taiwanese investors need to watch

Bitcoin sharply declined 21% in 10 days, retesting the $61,000 level unseen in four months. The key trigger for this drop was Strategy (NASDAQ: MSTR) suddenly changing course, no longer accumulating Bitcoin, but instead spending $1.38 billion to buy back its own convertible bonds. Market sentiment instantly shifted from “strongest buyer” to “potential seller,” sparking fears of a doom loop similar to Terra Luna in 2022.

Strategy’s pivot: from largest buyer to debt liquidation

Since March this year, Strategy has accumulated a total of 126,016 BTC, investing over $9.31 billion. However, the announcement on May 15th completely changed the market narrative: the company decided to use the cash raised from recent equity issuance to buy back $1.38 billion in debt, temporarily halting its Bitcoin acquisition plans.

At the same time, Strategy’s Stretch preferred shares (STRC) also broke through the $100 psychological barrier, further intensifying perceptions of liquidity stress in the market.

STRC preferred shares have a unique design: when the share price hits $100, Strategy can issue new shares at $100 to raise cash, while paying an adjustable annual dividend of 11.5% (distributed monthly in cash). If the share price falls below $100, new investors will buy at a lower price, effectively demanding a higher dividend yield. On the surface, this shouldn’t impact Strategy’s risk profile, but the market interprets it as a sign that “financing is slowing down.”

Only $900 million in cash remaining—how long can it last?

In the first five months of 2026, Strategy raised $7.5 billion through preferred shares, which was a significant support for BTC prices. But now, cash reserves have shrunk to just $900 million, enough to cover only six months of preferred dividend payments.

From a leverage perspective, Strategy’s net leverage ratio is 11%, indicating the proportion of company debt relative to assets. Under any standard, its Bitcoin holdings—even if BTC drops to $30,000—would be sufficient to cover the debt. However, short-term liquidity issues remain.

The “doom loop” shadow: panic similar to Terra Luna

X user and Grand Line commentator zeroxkyle analyzed on his X platform that if Strategy is forced to sell Bitcoin, it would only deepen the price decline and worsen liquidity conditions. This analysis references the “doom loop” concept: buyers hesitate due to fear of large sellers entering, leading to falling prices, which then forces more Bitcoin to be sold.

This cycle was most evident during the Terra Luna collapse in 2022, where Luna’s devaluation triggered a chain reaction, increasing selling pressure and causing a spiral of decline. Now, market fears are that Strategy’s Bitcoin selling pressure could repeat a similar scenario.

Signals Taiwanese investors need to watch

Currently, Strategy has no contractual obligations forcing it to sell BTC, nor are there restrictions on selling MSTR stock at a discount. But deteriorating liquidity conditions are concerning, especially as spot ETF net outflows persist, STRC share prices remain low, and BTC hovers around the $61,000 level.

For Taiwanese investors, this liquidity crisis at Strategy warrants close attention. Three reasons: Strategy is a globally recognized major Bitcoin holder, and its moves directly impact BTC supply and demand; once the doom loop starts, it could trigger a chain reaction similar to the 2022 Luna event; Bitcoin spot ETFs have experienced continuous net outflows since 2026, indicating weakening institutional buying momentum. Until STRC recovers to $100, the probability of BTC breaking above $70,000 remains low.

Investors should monitor key indicators: Strategy’s cash burn rate, STRC stock price trends, daily net flows of BTC ETFs, and whether other large corporations or funds begin selling Bitcoin. These signals will determine whether this correction is a short-term buying opportunity or the start of a longer-term seller’s market.