Bitcoin BTC$68,770.50 treasury firm Strategy (MSTR) said it can ride out a potential plunge in the price of the largest cryptocurrency to $8,000 and still honor its debt.

“Strategy can withstand a drawdown in $BTC price to $8K and still have sufficient assets to fully cover our debt,” the Michael Saylor-led company said on X.

The company, which holds more bitcoin than any other publicly traded company, has accumulated 714,644 BTC, worth roughly $49.3 billion at current prices, since adopting it as a treasury asset in 2020.

Over the years, it has stacked bitcoin via debt, a tactic echoed by peers such as Tokyo-listed Metaplanet (3350). It owes about $6 billion — equivalent to 86,956 BTC — against bitcoin holdings over eight times larger.

While these debt-financed bitcoin buys were widely cheered during the crypto bull run, they have become a liability in the wake of the token’s crash to nearly $60,000 from its October peak of over $126,000.

If Strategy is forced to liquidate its bitcoin holdings to pay off the debt, it could flood the market and drive prices even lower.

In the Sunday post, Strategy assured investors its bitcoin holdings would still be worth $6 billion even at an $8,000 BTC price, enough to cover its debt.

The company noted that it doesn’t have to pay all its debt at once, as the due dates are spread over 2027 and 2032.

To further assuage concerns, Strategy said it plans to switch existing convertible debt into equity to avoid issuing additional senior debt. Convertible debt is a loan that lenders can swap for MSTR shares if the stock price rises high enough.

Skeptics remain.

Critics like pseudonymous macro asset manager Capitalists Exploits point out that while $8,000 bitcoin might technically cover the $6 billion net debt, Strategy reportedly paid around $54 billion for its stash, an average of $76,000 per BTC. A slide to $8,000 would amount to a whopping $48 billion paper loss, making the balance sheet look ugly to lenders and investors.

Cash on hand would cover only about 2.5 years of debt and dividend payments at current rates, the observer argued, and the software business pulls in just $500 million a year. That’s way too little to handle the $8.2 billion in convertible bonds plus $8 billion in preferred shares, which demand hefty, ongoing dividends like endless interest bills.

All this means that refinancing may not be readily available if bitcoin drops to $8,000.

“Traditional lenders are unlikely to refinance a company whose primary asset has depreciated significantly, with conversion options rendered economically worthless, deteriorating credit metrics, and a stated policy of holding BTC long-term (limiting collateral liquidity),” the observer said in a post on X. “New debt issuance would likely require yields of 15-20% or higher to attract investors, or could fail entirely in stressed market conditions.”

Anton Golub, chief business officer at crypto exchange Freedx, called the “equitizing” move a planned “dump on retail investors.”

He explained that buyers of Strategy’s convertible bonds have been primarily Wall Street hedge funds, who aren’t bitcoin fans but “volatility arbitrageurs.”

The arbitrage involves hedge funds profiting from discrepancies between the expected or implied volatility of a convertible bond’s embedded options and the actual volatility of the underlying stock.

Funds typically buy cheap convertible bonds and bet against, or “short,” the stock. This setup helps them bypass big price swings, while earning from bond interest, ups-and-downs volatility, and a “pull-to-par” boost where deep-discount bonds rise toward full value at maturity.

According to Golub, Strategy’s convertible bonds were priced for small ups and downs. But the stock swung wildly, letting hedge funds mint money from the arbitrage: buying the bonds cheaply while betting against the stock.

This setup worked beautifully when shares traded above $400, the trigger for bondholders to convert debt into stock. Hedge funds closed their shorts, bonds vanished via conversion, and Strategy avoided cash payouts.

At $130 a share, conversion makes no sense. So hedge funds will likely demand full cash repayment when the bonds mature, potentially putting Strategy’s finances under strain.

Golub expects the firm to respond by diluting shares.

“Strategy will: dilute shareholders by issuing new shares, dump on retail via ATM sales, to raise cash to pay hedge funds,” he said in an explainer post on LinkedIn.

“Strategy only looks genius during Bitcoin bull markets. In bear markets, dilution is real and destroys MSTR shareholders,” he added.