TD Cowen Cuts Strategy (MSTR) Target 35% as Bitcoin Slide Tests New Capital Playbook

Strategy’s equity is being pulled in two directions at once: Bitcoin’s drawdown is compressing multiples just as the company formalizes a capital framework that treats its BTC as a funding valve, not a shrine. TD Cowen leaned into the former on Tuesday, cutting its price target for Strategy (MSTR) by 35% to $260 from $400, citing “observed ongoing weakness” in Bitcoin. The bank, led by analyst Lance Vitanza, also lowered its year-end Bitcoin forecast to $100,000 from $140,000.

The tape reflects the pressure. Bitcoin slipped back below $60,000 on Tuesday; at $58,400, it was down more than 20% over the past month and more than 53% from an all-time high above $126,000 set last October, per CoinGecko. Strategy shares fell 8.6% to $84.75, giving back Monday’s brief respite after a nine-session skid. Since Strategy sold Bitcoin roughly a month ago—the first sale since 2022—the stock is down nearly 41% from $142.69 and more than 79% year-over-year.

Here’s the tension worth focusing on: Strategy’s new Digital Credit Capital Framework turns the balance sheet into a two-way instrument. The company now explicitly links cash management, preferred stock (STRC), and its 847,363-Bitcoin treasury, while reserving the right to act across the capital stack. Management can repurchase up to $1 billion of common and $1 billion of preferred—introducing potential arbitrage when either security trades at a discount—while a Bitcoin monetization program authorizes up to $1.25 billion of BTC sales to replenish cash when needed. Alongside the rollout, Strategy disclosed USD reserves of $2.55 billion.

For credit and equity holders, that structure changes the conversation. On one side, the framework is “a positive for credit visibility and capital flexibility,” as TD Cowen put it, because it pre-commits the firm to use its BTC as a flexible source of capital rather than a static trophy. It also better aligns STRC with liquidity levers: the preferred’s dividend policy is now more explicitly tied to cash reserves and the prospect of future Bitcoin liquidations. After Monday’s eighth dividend hike to 12%, recurring costs climb, but the signaling is clearer. TD Cowen called it a modestly constructive step for price stability and confidence in the preferred.

On the other side, every BTC sale—no matter how small—tests investor psychology. Earlier this month, Strategy sold 32 Bitcoin for $2.5 million, telegraphed as a show of commitment to preferred holders. The sale helped frame BTC as working capital, but it also introduced uncertainty about cadence and thresholds for future liquidations. When equity and preferred trade off the same underlying asset, policy clarity can calm some investors while spooking others who anchor to a purist “never sell” narrative.

Costs are another pressure point. STRC slipped 0.7% Tuesday to $83.11, below its $100 par, after hitting a record low of $71.25 last week. Rising dividend expense, now at 12%, sharpens the need for that $2.55 billion cash buffer to cover a protracted Bitcoin downturn. That is precisely the problem this framework tries to solve: set rules, provide runway, and buy optionality to repurchase discounted securities while keeping the BTC stack productive as collateral or liquidity.

Market expectations are adjusting in real time. On Myriad, a prediction market owned by Dastan, traders now assign a 14% chance that Strategy will hold more than 1 million Bitcoin by year-end, down from 17.5% a week ago—an acknowledgment that two-way allocation may slow headline accumulation during stress. TD Cowen underscored the same reality last July from the other side of the cycle when it lifted its target to $680 as shares traded above $450; that reflexivity works both ways.

Net-net, TD Cowen’s downgrade is about beta—Bitcoin’s trajectory still dominates the equity—but the more interesting development is micro: Strategy is building a rules-based liquidity stack around its BTC. If executed with discipline, the ability to repurchase discounted equity/preferred while topping up cash via a $1.25 billion BTC monetization line could create value through the cycle. If Bitcoin weakness deepens or messaging around sales turns sloppy, the same mechanism can amplify drawdowns. The framework won’t remove volatility, but it might shift how the company absorbs it.