Sell Bitcoin to pay dividends? Is MicroStrategy providing a "backstop" for STRC?

Nine months ago, on July 31, 2025, Michael Saylor called the newly listed STRC preferred stock the company’s “iPhone moment” during MicroStrategy’s Q2 earnings conference, with the core selling point being to allow the company to “expand holdings on a large scale without selling a single Bitcoin.” But by the Q1 2026 earnings report in May this year, the same Saylor explicitly included “selling some Bitcoin to pay dividends” into the operational model.

After market close on May 5, MicroStrategy disclosed its Q1 2026 earnings, reporting a net loss of $12.54 billion, with a quarter-end holding of 818,334 Bitcoins, at an average purchase cost of $75,537 per Bitcoin. During the earnings call, Saylor first actively stated that the company might sell some Bitcoin to pay dividends, with the exact words being “We might sell some Bitcoin to pay dividends, aiming to desensitize the market and signal that we are indeed doing so.”

CEO Phong Le’s statement was even more direct, describing the purpose of selling Bitcoin as “strengthening the balance sheet” or “increasing Bitcoin per share.” This frames Bitcoin sales as a routine operational tool, not a crisis fallback. After the announcement, MSTR’s stock price fell over 4% in after-hours trading.

So far in 2026, the company has continued to increase its Bitcoin holdings, with just the STRC preferred stock contributing about 77,000 BTC to the position, with no sales of Bitcoin so far. In other words, this is a statement “about the potential future sale of Bitcoin,” not an announcement that Bitcoin is already being sold.

Pressure Focused on STRC

STRC is a perpetual preferred stock launched by MicroStrategy in July 2025, with no maturity date, an annual dividend of 11.5%, paid monthly. As of the Q1 2026 report, the circulating volume of STRC was approximately $8.5 billion.

The design goal of STRC is to make it “like a savings account.” The monthly dividend rate is not fixed but dynamically adjusted based on market demand. When STRC in the secondary market falls below its face value of $100, the company raises the dividend rate to attract investors back; when it rises above face value, the rate is lowered again. This mechanism works quite well, with a 30-day historical volatility of only 1.7%, far below gold (36%) and the S&P 500 (20%).

Buyers of STRC are not native crypto capital but fixed-income investors seeking stable high yields. Their target is not BTC spot price appreciation but the 11.5% monthly cash flow.

Why can this preferred stock become the central focus of MicroStrategy’s entire annual obligations? Let’s look at the structure.

According to the Q1 2026 financial disclosure, MicroStrategy’s total annual dividend and interest obligations are about $1.5 billion. The single STRC accounts for about $978 million, roughly 65% of the entire system. The remaining four preferred stocks—STRD, STRF, STRK, STRE—together amount to about $360 million, with $8.2 billion in convertible bonds at an average annual interest rate of only 0.42%, corresponding to an annual interest of just $34.6 million.

The entire MicroStrategy’s interest payment system relies on STRC alone bearing about two-thirds of the pressure. This directly explains why the first to adjust the payout rhythm on April 17 was STRC, not other preferred stocks.

The operation of STRC does not rely on operational cash flow but is a three-legged cycle. Saylor described it at the earnings call as “using credit to buy Bitcoin, letting it appreciate, and selling part to pay interest.” New investors buy STRC, raising funds split into two parts: one part buys Bitcoin (increasing holdings), and the other goes into USD reserves (buffering). The USD reserves pay dividends monthly. The remaining Bitcoin position continues to appreciate in the secondary market.

As long as Bitcoin’s annual appreciation rate reaches the critical threshold of 2.3%, the USD value of the BTC position grows annually by at least $1.5 billion, covering the total annual obligations. In this scenario, the cycle sustains itself, and the company does not need to net sell a single Bitcoin from its holdings.

But if any of the three legs break—whether STRC cannot be sold at ATM, USD reserves run out, or Bitcoin stagnates long-term—the cycle must trigger a safety net. This “safety net” involves directly selling part of the 820k Bitcoin holdings to cover dividends.

Saylor’s statement on May 5 essentially does not mean “we are now going to take this safety net route,” but rather that the previously hidden backup option is now made explicit, allowing the market to price it in advance.

From IPO to the Bitcoin sale announcement

On July 21, 2025, STRC was listed, raising $8B with an initial monthly dividend rate of 9%. By December 1, MicroStrategy quietly established a USD reserve of $1.44 billion. According to the announcement, this fund was used to support preferred stock dividends and unpaid debt interest, with an initial coverage of about 21 months, aiming for over 24 months long-term. Setting up the USD reserve itself is an indirect signal: MicroStrategy began creating a cash buffer for the “what if STRC issuance stalls” scenario.

On March 1, this year, the STRC monthly dividend rate was increased from 9% to 11.5%. This increase itself was a signal, triggered by the variable dividend design, as the secondary market demanded higher yields to accept STRC, prompting the company to raise the rate to attract buyers.

On April 17, STRC changed to a bi-monthly announcement. Maintaining the 11.5% annual rate and total amount, the dividend payout shifted to semi-monthly. The official reason was “reducing ex-dividend dips, lowering volatility, and bringing STRC closer to its $100 face value.” By May 5, the “safety net” option was officially announced.

Looking at this nine-month chain in chronological order and then viewing the chart, the last 18 days’ two-step switch becomes clearer. The rhythm was adjusted on April 17, and the sale of Bitcoin was admitted on May 5. During these 18 days, MSTR rose from $168.28 to $186.90 at the May 5 close, while Bitcoin increased from about $75,150 to $81,286, reaching a high since January this year. From the price perspective, the market did not interpret the “rhythm adjustment” as a pressure signal. But after the earnings report that evening, MSTR fell over 4% in after-hours, and Bitcoin also retraced some gains. The re-pricing caused by the sale announcement was immediate.

Putting together this nine-month timeline, the true meaning of Saylor’s “desensitizing the market” statement becomes clear.

He is not being forced to sell Bitcoin, nor is he breaking a promise. CEO Phong Le described the purpose of selling Bitcoin as “strengthening the balance sheet” and “increasing Bitcoin per share,” both of which are routine financial management terms for a publicly listed company—“selling assets to optimize the report” as a normal market operation, and “tracking Bitcoin KPI” as a standard quarterly metric.

MicroStrategy’s use of this “operational management” language to characterize Bitcoin sales, rather than “being forced” or “emergency” language, indicates that the nature of this action has shifted from a “crisis fallback” to a “routine operational tool.” The key change is that the safety net has moved from “implicit” to “explicit.”

Under what circumstances would Bitcoin be sold?

MicroStrategy needs to pay about $125 million in dividends and interest monthly (totaling $1.5 billion annually). Usually, this is not paid by selling Bitcoin but through a two-legged rotation.

The first leg is funds raised from new STRC issuance. Investors buy STRC, some of the money directly goes into MicroStrategy’s operational account, enough to cover monthly dividends. This is routine. The second leg is the $2.25 billion USD reserve. The purpose of the reserve is to reduce the likelihood of selling Bitcoin. When STRC issuance slows or monthly fundraising falls short of obligations, the shortfall is covered from the reserve.

Dividing $2.25 billion by the $125 million monthly obligation yields about 18 months of coverage. This is where the “18 months of coverage” mentioned by management in the earnings report comes from.

But the reserve is not unlimited. If STRC cannot be sold long-term—say, the secondary market discounts the 11.5% high yield—the reserve will be drained continuously. Before the reserve runs out, MicroStrategy will either raise the STRC dividend rate to attract investors again (at the cost of heavier obligations), or activate the last safety net: selling Bitcoin to cover dividends.

Therefore, the full trigger chain for selling Bitcoin is: STRC issuance is blocked, USD reserves are depleted, and before the reserve hits bottom, Bitcoin must be sold to meet obligations.

So, if it really comes to that, how much would MicroStrategy need to sell? Assuming STRC cannot be sold, USD reserves are exhausted, and Bitcoin prices stay flat, how many BTC would need to be sold from the current holdings of 818,334 BTC to cover the $1.5 billion annual dividend and interest?

The logic is straightforward: the annual dollar amount to be paid divided by the current dollar value of one BTC equals the number of BTC to sell annually. Using the $1.5 billion obligation and the current BTC price of $81,000, the amount is approximately 18,519 BTC, about 2.3% of the total holdings.

If Bitcoin falls back to an average purchase cost of around $75,537, the annual sell volume would rise to about 19,857 BTC, just enough to offset the nearly 26% increase in the 77,000 BTC accumulated through STRC so far in 2026.

At the current price of $81,000, ignoring BTC appreciation, depleting the position would take 44 years. This is where the management’s “BTC can sustain for 43 years if it doesn’t appreciate” figure comes from.

In Bitcoin’s historical context, 2.3% seems low for a constraint. Over the past five years, BTC has had a compound annual growth rate of about 155%, and over ten years about 71.5% (according to Bitbo data). But Bitcoin has also experienced drawdowns of -77% in 2018 and -65% in 2022. The USD reserve exists to buffer such declines, covering about 18 months of obligations according to management.

Based on current pace, if Bitcoin continues to stagnate and STRC issuance remains blocked, the $2.25 billion cash wall will be exhausted within 18 months.

The phrase “We might sell some Bitcoin” became news not because of the act itself but because it is a repeatedly reaffirmed commitment over three years that is now being rewritten as an embedded option.

Click to learn more about Rhythm BlockBeats job openings

Join the Rhythm BlockBeats official community:

Telegram subscription group: https://t.me/theblockbeats

Telegram discussion group: https://t.me/BlockBeats_App

Twitter official account: https://twitter.com/BlockBeatsAsia