The truth behind Strategy's STRC yield of 11.5%

Author: Matt Crosby, Director of Research and Analysis at Bitcoin Magazine Pro; Translation: Shaw, Golden Finance

You may have recently heard a lot about the product STRC (Stretch). It was launched by Bitcoin Treasury Strategy Company and marketed as a dollar-stable financial product with an annualized return of over 11.5%, paying cash dividends monthly, backed by the world’s largest Bitcoin reserve asset. If this sounds almost too good to be true, your skepticism is entirely justified.

Core Overview

• STRC raised $8.5 billion in about 9 months, a fundraising speed 5.5 times faster than Strategy’s initial $8.4 billion Bitcoin holdings deployment.

• Strategy currently holds over 815k Bitcoins, with approximately $21.8 billion in senior debt obligations still to be paid to common shareholders.

• The product relies on a flywheel model to achieve self-sustaining profitability: Bitcoin appreciation and positive market sentiment enable smooth operation, but there are obvious pressure points and risks.

• STRC holders do not directly own Bitcoin; they only have priority claims on the company’s remaining assets.

Strategy’s Capital Structure

To understand STRC, first clarify its position within the capital structure. Strategy has built a layered capital stack—a tiered financial product architecture that determines the order of repayment in case of risk.

The hierarchy from top to bottom is:

1. Convertible Bonds: Approximately $8.25 billion, due between 2028 and 2032, with nearly zero coupon rate. In liquidation, these bondholders have absolute priority for repayment, with no exceptions.

2. STRF: Perpetual preferred stock with a fixed annual return of 10%, no equity appreciation rights, and cumulative dividends—overdue interest accumulates and must be paid later.

3. STRC: The product analyzed in this article.

4. STRK: An equity product convertible into MSTR common stock at a rate of $1,000 per share.

5. STRD: Non-cumulative fixed-rate preferred stock; if dividends are not paid in a given period, they are forfeited and do not accumulate.

6. MSTR Common Shareholders: At the bottom of the payment chain, enjoying all asset appreciation benefits, but debt repayment and interest payments are last, with no dividends.

Overall, the total senior debt and preferred equity claims ahead of MSTR common shareholders amount to about $21.8 billion.

Figure 1: Strategy Capital Structure Hierarchy.

Flywheel Operation Mechanism

STRC is essentially a near-price-stable product, aiming to keep each net asset value at $100, paying monthly cash dividends with an current floating annual yield of about 11.5%. To understand its operation, two often-confused independent mechanisms need to be separated.

When Strategy issues STRC at par, the raised funds are directly used to increase Bitcoin holdings in the company’s treasury—this is the asset accumulation engine. The dividend payout funds come from another source: the company regularly issues new MSTR common shares, accumulating USD cash reserves, which are then used to cover all preferred dividend obligations, including those of STRC.

STRC does not rely on its own assets’ income to pay interest. The funds raised are solely used to buy Bitcoin; the cash reserves needed to pay dividends are entirely borne by the dilution of common shareholders.

From this perspective, STRC separates Bitcoin acquisition from common share dilution, but ongoing dividend demands create another parallel dilution pressure. It does not truly reduce overall equity dilution; it merely shifts the source of dilution.

Figure 2: Strategy’s Bitcoin Accumulation Indicator.

As long as Bitcoin continues to appreciate and MSTR’s net asset value premium remains above 1.0x, both operational mechanisms can continue to function. The more funds STRC raises, the more Bitcoin it buys, further increasing asset net value; this makes additional issuance of common stock feasible, continuously supporting dividend payments. The entire flywheel thus forms a self-reinforcing positive cycle.

Figure 3: Detailed Explanation of Strategy’s Amplification Ratio.

Risk Failure Critical Point

This is a rarely discussed aspect. The price of STRC must stay above about $95 for the on-market issuance model to continue functioning. If market confidence weakens and the price drops below this threshold, the channel for raising funds via STRC to buy Bitcoin will close.

Additionally, if MSTR’s net asset value premium narrows significantly, the efficiency of raising USD cash reserves through on-market issuance of common stock for dividend payments will decline sharply. At that point, Strategy can only use its existing USD cash reserves—currently about $2.25 billion—to sustain operations. At the current dividend obligation level, this buffer can support roughly a year and a half of operations.

Beyond that, if all fundraising channels fail, Strategy will be forced to sell Bitcoin to maintain dividend payments. Selling Bitcoin would exert downward pressure on the core assets underpinning the entire structure.

Figure 4: STRC in a Bear Market Scenario.

Another key legal point needs clarification. The underlying support for STRC is investors’ general priority claim on the company’s residual assets, not direct backing by Bitcoin. Holding STRC does not mean you can directly claim ownership of any Bitcoin on Strategy’s balance sheet. In liquidation, your claims are senior to common shareholders, but this is fundamentally different from directly owning Bitcoin.

Is This a Ponzi Scheme?

This question is often raised. The objective, straightforward answer is: yes, based on cash flow logic. Currently, STRC holders’ dividends mainly rely on new investor funds rather than Bitcoin income or company operating revenue. From a cash flow perspective, its operation mechanism is entirely consistent with a Ponzi scheme.

Figure 5: Key Statistics of STRC.

However, the critical difference is: Every penny raised by STRC is invested in Bitcoin—a real, tradable, fixed-supply, verifiable asset. The structure does not generate fake returns out of thin air; instead, it converts new inflows into real assets, betting on their appreciation. Whether this bet is profitable depends on Bitcoin’s long-term price trend, not financial fraud. It is not a traditional Ponzi scheme, but to operate as intended, it relies on continuous capital inflows and a strong Bitcoin price.

Conclusion

So, is STRC an outrageously good product? The answer depends almost entirely on your view of Bitcoin’s long-term trajectory. If you believe Bitcoin will significantly appreciate further, STRC can turn this bullish outlook into stable monthly income, offering a risk-reward profile that’s hard to find elsewhere. If you do not expect Bitcoin to continue rising, then the entire capital structure, STRC, and even MSTR itself will face severe stress testing.

A particularly important reminder: do not treat the 11.5% annualized yield as risk-free. It is not capital-protected; it is highly correlated with Bitcoin’s price and depends on multiple structural dependencies. Before investing in this product, at minimum, you should understand these underlying structural dependencies.