What was supposed to be a cautious detour into crypto has turned into a bruising lesson for America’s public retirement systems.
As Bitcoin’s volatility intensified through late 2025 and early 2026, Strategy (formerly MicroStrategy)—the most aggressive corporate buyer of Bitcoin—saw its shares collapse nearly 67% in six months. The fallout didn’t stop with crypto traders. It rippled straight into U.S. public pension funds, wiping out an estimated $337 million in paper value tied to Strategy stock.
For funds designed to protect teachers, firefighters, and public workers, the losses have reignited an uncomfortable debate: How much crypto risk is too much for retirement money?
From “Safe Proxy” to Double-Leverage Pain
At the heart of the issue is Strategy’s radical transformation under executive chairman Michael Saylor. Once a software company, Strategy reinvented itself as a self-described “Bitcoin treasury company,” financing massive BTC purchases through a mix of debt and equity issuance.
Today, the firm holds more than 687,000 Bitcoin—a hoard that can supercharge gains during bull markets but brutalize shareholders when prices fall.
For pension funds wary of holding Bitcoin directly, Strategy appeared to offer a workaround: a regulated Nasdaq-listed stock that provided indirect BTC exposure without custody headaches or political friction.
Instead, it became what critics now call a “double-leverage trap.” Investors weren’t just exposed to Bitcoin’s swings, but also to the debt Strategy used to buy it.
When Bitcoin slid below $74,000 in early February 2026, Strategy shares plunged under $135, and the risks became impossible to ignore.
The Numbers Are Stark
Across the country, 11 U.S. state pension funds collectively hold nearly 1.8 million shares of MSTR.
Then: Valued at roughly $577 million
Now: Worth about $240 million
Damage: Around $337 million in unrealized losses
While those losses remain on paper, they underscore how quickly crypto volatility can spill into systems built for stability—not speculation.
Big States, Big Exposure
Some of the nation’s largest pension systems are among the hardest hit.
California Public Employees’ Retirement System (CalPERS)
The largest U.S. public pension fund, with over $550 billion in assets, entered Strategy in Q3 2025. It bought 448,157 shares for more than $144 million, one of its most visible crypto-linked investments.
By November 2025, the position had already shrunk to about $80 million. As prices slid into 2026, the stake likely fell further—potentially below $60 million.
New York State Common Retirement Fund
Managing roughly $282 billion, the fund held around 282,000 MSTR shares valued at $91 million in September 2025. With the stock down around 60%, an estimated $53 million has since evaporated.
Florida State Board of Administration Retirement System
Overseeing close to $250 billion, Florida’s fund once held a Strategy stake worth about $79 million, now down roughly $46 million. Notably, the fund increased its exposure with a $47 million purchase in December 2025—just before Bitcoin fell another 25% in Q4 2025, erasing those gains almost immediately.
Smaller Funds, Same Story
The pain isn’t limited to the biggest players.
New Jersey’s Common Pension Fund D held about 89,000 shares valued at $14 million late in 2025—now likely worth half that.
Louisiana’s State Employees Retirement System disclosed nearly 18,000 shares worth $3.1 million in January 2026, now down more than 50%.
CalSTRS, California’s teachers’ retirement system, reported 258,785 shares valued at $83 million earlier in 2025. Based on current prices, that position may now be down roughly $50 million.
Different states, different sizes—same pattern.
A Fiduciary Stress Test
The Strategy episode is quickly becoming a stress test for fiduciary responsibility.
Analysts warn that Strategy’s roughly $21 billion in debt-financed Bitcoin exposure could create cascading risks if prices fall further. A deeper drawdown could limit the company’s access to capital markets or force structural changes that place even more pressure on equity holders.
For pension trustees, the issue isn’t ideology—it’s process.
Public retirement systems operate under strict mandates emphasizing diversification, transparency, and risk control. A stock whose value is tightly tethered to a single volatile asset—and amplified by leverage—sits uneasily within that framework.
The Bigger Lesson
As of early February 2026, Bitcoin has shown signs of stabilizing, offering a brief pause in the bleeding. But its growing correlation with broader equity markets raises a new danger: future sell-offs could hit stocks and crypto at the same time.
For now, the losses remain unrealized. But $337 million, even on paper, is a sobering reminder.
When public pension funds chase crypto upside through leveraged proxies, it isn’t hedge fund managers or day traders absorbing the downside—it’s retirees. And that reality is forcing a long-overdue reckoning over how far public money should venture into Bitcoin’s high-wire act.