S&P Global Ratings has assigned a so-called junk bond rating to Bitcoin treasury company Strategy (NASDAQ:MSTR).

The ratings firm on Monday assigned Strategy a B- rating with a stable outlook, well below its investment-grade threshold, citing the company’s “high bitcoin concentration, narrow business focus, weak risk-adjusted capitalization, and low U.S. dollar liquidity.”

The rating falls into S&P’s speculative grade. It suggests that the company is “able to service debt for now, but vulnerable to shocks,” VanEck Head of Digital Assets Research Matthew Sigel said in an X post.

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Over the past five years, Strategy has shifted its focus from software to issuing debt to accumulate Bitcoin. This has made its stock a proxy for the digital asset for investors who either cannot access the asset directly or do not want to.

S&P said that while Strategy’s debt obligations were denominated in dollars, the company had low dollar liquidity because it does not generate cash and all excess cash is used for Bitcoin purchases and company operations.

S&P said Strategy’s model depended on the company’s ability to raise capital, including to meet debt obligations. The firm warned that ability could be significantly hampered in a Bitcoin downturn, which could lead to a default or the company selling its Bitcoin holdings at lower prices as a last resort.

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Still, Strategy’s credit rating has been celebrated by some proponents. For example, Strategy Chair Michael Saylor on X said that the company was the first Bitcoin treasury firm to receive a major credit rating.

Meanwhile, BTC Inc. CEO David Bailey said, “The market demand for treasury companies is about to explode.”

S&P said it could upgrade Strategy’s rating if the company improved its dollar liquidity, reduced its reliance on convertible debt and continued to demonstrate a strong ability to raise capital even in Bitcoin downturns.

However, an upgrade is unlikely in the next 12 months, S&P added.

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