In the previous article, we introduced how Strategy, through STRC, has brought a new marginal buying dynamic to Bitcoin.

However, two events that occurred during the new dividend ex-date cycle have caused some traders to become uneasy about the “new paradigm of supply and demand dynamics” that STRC brings to Bitcoin.

Saylor Speaks Out

After-market on May 5th, during MicroStrategy’s Q1 2026 earnings call, Saylor publicly acknowledged for the first time that the company might sell some Bitcoin to pay dividends.

Saylor’s statement can be understood in three ways.

The first interpretation is that Saylor is trying to inform the market in advance and digest this possibility to avoid a sharp reaction if it actually happens. This is a “public relations” move to provide price buffers for BTC.

The second, straightforward interpretation is that Saylor’s promise of “never selling Bitcoin” is the cornerstone supporting the MSTR premium and the entire Bitcoin treasury narrative. Once Saylor opens a gap himself, the market will reassess the stability of the entire system.

The third interpretation is that MicroStrategy’s previous financing mainly relied on two tools: issuing MSTR common stock and issuing convertible bonds. Preferred stock has only become the main tool in the past year, but its issuance scale is still limited by the secondary market’s capacity to absorb. The only truly scalable tool that can avoid creating future obligations is the ATM (at-the-money) issuance of MSTR common stock. The problem is that MSTR’s mNAV only exceeds 1.22 times when new common stock issuance does not dilute the BTC per share, and currently MSTR’s mNAV is not far from this threshold. Saylor’s relatively mild approach of “possibly selling Bitcoin” is used to attract market attention and make the ongoing issuance of MSTR common stock seem more acceptable in terms of cost.

From the balance sheet perspective, MicroStrategy’s current year’s dividends and interest total about $1.5 billion, with monthly dividends and interest around $125 million. STRC accounts for about $978 million, or 65%. As of Q1 this year, the company has about $2.25 billion in USD reserves, which, according to management, can cover 18 months of dividend payments.

If STRC issuance stalls and the reserve funds are exhausted, the last resort would be to sell Bitcoin to pay dividends. Based on $80k 's Bitcoin price, with $1.5 billion annual interest and dividends, Strategy would need to sell about 18,519 BTC annually, accounting for 2.3% of the total position.

As long as Bitcoin appreciates at least 2.3% annually, this selling can be absorbed by the position’s appreciation. Over multiple years, Bitcoin’s compound annual return is usually in the double or even triple digits, so 2.3% is hardly a constraint.

However, Bitcoin has experienced single-year declines of -77% in 2018 and -65% in 2022. When Strategy sells 2.3% of its BTC position at the bottom, the company’s balance sheet will deteriorate significantly.

Since 2026, MicroStrategy has net bought about 77,000 BTC through STRC. If a sell scenario is triggered and BTC falls back to Strategy’s average cost of $75,537, then 2.3% of the total position would be equivalent to 25% of this year’s incremental purchase.

In other words, Saylor’s one-year sale could offset four months of buying.

STRC “Weakness”

The duration that STRC traded above $100 before the dividend ex-date

During the March dividend cycle, STRC traded above $100 for 13 days before the ex-date, with a total trading volume of 3.42 million shares, corresponding to about 22,000 BTC bought. In April, the ex-dividend cycle brought about approximately 47,000 BTC of buying.

Now, with only five trading days left until the May 15th ex-dividend date, STRC has never returned to its face value of $100 during the May cycle, meaning the corresponding BTC buy-in is zero.

To understand why this dividend cycle is suddenly different, we can split STRC buyers into four categories:

• The first category is arbitrageurs who flooded in a few days before the ex-date. They buy STRC before the ex-dividend date and sell after receiving the dividend. The peak trading volume on the ex-date mainly comes from these funds, and their sell orders are the main driver of STRC’s price decline after the ex-date.

• The second category is arbitrageurs who entered after the ex-date. STRC usually drops to around $99.20 to $99.50 after the ex-dividend date. They buy and place sell orders around $99.95 to $99.99, waiting for STRC to return to face value. These funds don’t need STRC to fully recover to $100 to profit; their sell orders are the fundamental reason for STRC lingering below face value.

• The third category consists of medium- to long-term holders who treat STRC as a financial product. They do not actively arbitrage but will redeem small amounts when funds are needed. These occasional sell orders, together with the second category, keep sell limit orders around $100.

• The fourth category is the true long-term holders who will not sell. They have little to no impact on the price dynamics of each dividend cycle.

If the funds causing STRC issuance come from arbitrage traders, the entire market behavior will tilt toward “selling near $100.”

This was the situation last month.

In March and April, Strategy raised nearly $5 billion through STRC, a volume that can only be attributed to arbitrageurs, as long-term holders would not suddenly increase their holdings so dramatically.

This also led to the strongest arbitrage sell-off in April.

Strong selling means that STRC’s decline after the April ex-date was deeper than usual, and the return to $100 was slower, with many first-category funds unable to exit in time and getting caught at the lows. These funds, having suffered losses, may not participate in arbitrage in May anymore.

Additionally, external conditions are changing.

The S&P 500 keeps hitting new highs, and the opportunity cost for fixed income funds to buy STRC has increased, as many sectors in the US stock market can generate single-day gains exceeding STRC’s annual return of 11.5%.

Management has already foreseen this issue and submitted an amendment on April 17th to allow STRC to pay dividends twice a month. Semi-monthly dividends could reduce the price decline on each ex-date and distribute arbitrage gains. However, this amendment will only take effect on July 15th, and next week’s ex-dividend will still follow the monthly schedule.

Reverse Flywheel

The previous article discussed Strategy’s flywheel: funds used to buy STRC are amplified threefold via leverage into BTC, BTC’s rise improves STRC’s collateral quality, attracting more funds into STRC. Each link pushes the next higher.

What if the flywheel spins in the opposite direction?

If STRC cannot return to face value, Strategy’s at-the-money issuance window closes, no new cash flows to buy BTC, BTC loses marginal buy support, its price faces downward pressure, STRC’s collateral weakens, and fixed income investors demand higher credit spreads. As spreads widen, either MicroStrategy raises its dividend yield to increase interest expenses or investors continue selling STRC, making it harder for the price to return to $100.

Each link pushes the next lower.

Saylor’s remark about “possibly selling some BTC” is essentially pre-pricing the end of this reverse cycle.

Specifically, in numbers: in April, Strategy net bought about $4.1 billion worth of BTC via STRC. If in May, STRC’s issuance drops back to around $1 billion and BTC appreciation does not reach the 2.3% threshold, Strategy will activate its sell-to-pay-interest plan, and monthly net contribution could plummet from $4.1 billion to just a few hundred million, shrinking by over 90%.

The market’s previous argument that “STRC buy support” underpins BTC’s bottom will be invalidated, and BTC’s price could face a sharp correction.

It’s important to acknowledge this is just one possible scenario. If next week STRC smoothly returns to $100 and the issuance scale remains substantial, all these concerns will be postponed.

Optimistic Signals

Before the market open on May 8th, STRC issued its first tranche during this dividend cycle, corresponding to a buy-in of 0.4 BTC.

The absolute scale is insignificant, but the significance lies in the transition from zero to one.

Meanwhile, Coinbase’s premium briefly turned positive again, returning to April levels.

It appears that Bitcoin, which is losing upward momentum, will either fall back into February’s range or attack $90k. Next week’s performance of STRC will be crucial.

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