Will Strategy still sell coins after STRC drops to $82?

Kau朱，Goldman Sachs Finance

Summary: Over the past month, concerns caused by STRC's ongoing de-pegging have spread throughout the crypto market. For a long time, the market generally believed that Strategy would not sell tokens, but at the end of May, Strategy sold 32 BTC, triggering market volatility. Subsequently, the two major preferred stocks, STRC and SATA, continued to de-peg. As of the latest report, STRC is trading at $89.16. Amidst the continued de-pegging of preferred stocks, investors are questioning whether Strategy will keep selling tokens to pay dividends.

1. The Plunge of Perpetual Preferred Stocks

On May 29, STRC briefly fell to $97.11, then rebounded and closed at $98.57. The ability of Strategy to continue issuing ATM to use these preferred securities as financing tools drew attention.

Later, STRC's decline widened, even dropping to a low of $82.50 on June 18.

Meanwhile, SATA also faced difficulties, dipping just above $90 on June 18. Matt Cole, CEO of Strive, called this "the hardest day in digital credit history," and quickly insisted that there was actually no problem.

STRC and SATA are perpetual preferred stocks issued by Bitcoin Treasury Inc. They sit at the intersection of two worlds: one is the stable, high-yield preferred stock universe, and the other is the more volatile world of corporate Bitcoin asset accumulation. Perpetual preferred stocks are securities that pay fixed or floating dividends indefinitely, with no maturity date. Their operation is similar to high-yield bonds, trading close to par value and providing a steady income stream.

The STRC issued by Strategy has an approximate yield of 11.5%, paying dividends twice a month. SATA, issued by Strive, has a yield of about 13%, with floating dividends paid daily. This frequent payout aims to attract income-seeking investors.

Both STRC and SATA are designed to trade close to their $100 face value and generate substantial regular income, thus attracting income-focused investors.

Matt Cole, CEO of Strive, attributed the sharp drop in stock prices to leveraged liquidations rather than deterioration in issuer credit quality.

What happened today was a leverage liquidation event, not a deterioration in the underlying credit quality.

There’s an old saying in fixed income markets: the road to hell is paved with yield.

When investors find an asset offering attractive yields, relatively low volatility, and strong underlying credit features, many will conclude that just holding it isn’t enough. They borrow against it. They leverage up. They try to boost yields.

This works until it doesn’t.

When market trends turn against leveraged holders, forced selling can trigger a chain reaction. Prices fall, margin calls increase, more selling occurs, and the cycle self-reinforces. Selling behavior drifts away from fundamentals and becomes driven by balance sheet constraints.

We’ve seen this repeatedly in traditional finance. Some of the biggest hedge fund failures in history involved highly leveraged positions in U.S. Treasuries. Not because Treasuries suddenly turned bad, but because investors overextended trying to earn extra yield from seemingly safe, stable assets.

This is the dynamic playing out in digital credit today.

Cole emphasized that the company’s dividend reserves are sufficient to continue paying dividends. Strategy also stated that its reserves are enough to support dividend payments long-term—"with 32 years of dividend coverage through its BTC holdings."

2. Why Did STRC Drop Nearly 20%?

Falling from the pegged price of $100 to $82.50, STRC declined by nearly 20%.

STRC was designed as a perpetual preferred stock pegged at a $100 face value and shouldn’t experience such a sharp drop. Due to STRC trading below par, Strategy has suspended its mechanism of raising funds by issuing new shares to buy Bitcoin at above par value.

According to Cole, “leverage liquidation” suggests that the trading volume of the preferred stock is low and susceptible to leverage effects, leading to a sharp price decline.

Additionally, as the largest BTC treasury company, Strategy’s balance sheet fluctuates with BTC prices. When BTC prices continue to decline, market concerns about the BTC treasury intensify, reducing demand for leveraged yield instruments and negatively impacting the preferred stocks.

Once STRC’s price falls below $100, many quantitative funds may interpret this as market skepticism about the product’s pricing mechanism. This could lead to passive deleveraging, technical stop-losses, and arbitrage fund exits, further amplifying the decline.

For more details, see "STRC Falls Below $95: Why Is It Continually De-Pegging? Is There a Default Risk?"

3. Will Strategy Continue Selling Tokens?

Strategy is far from entering a death spiral.

On June 20, Strategy founder Michael Saylor stated on social media: Strategy’s Bitcoin and USD reserves are about $48 billion higher than its debt.

When I gave this speech in October 2022, Bitcoin was trading near $20k, and Strategy held about 130k BTC worth roughly $2.6 billion. The post-split price of $MSTR was about $24. After Bitcoin dropped below $16k, our debt exceeded the combined value of BTC and cash reserves by about $300 million, and by the end of the year, $MSTR traded in the $13 range.

We stayed focused, strengthened the company, and executed our strategy. Since then, Strategy has raised over $60 billion in additional funds and invested over 716k BTC. Today, our BTC and USD reserves exceed debt by about $48 billion. Thanks to everyone who believed, persisted, and took a long-term view.

Previously, Strategy’s public image was “never sell tokens,” but on June 1, Strategy disclosed for the first time that it sold 32 BTC, worth $2.5 million, to pay preferred stock dividends.

This caused a strong reaction, with many interpreting it as Strategy’s inability to sustain itself. However, relative to Strategy’s enormous BTC reserves, $2.5 million is insignificant. The move signaled a strategic shift: from simply accumulating Bitcoin to actively managing its balance sheet.

On June 7, Luigi, Chief Strategy and Business Officer of Aave, said: I believe many people don’t realize that Strategy’s sale of Bitcoin is essentially a psychological tactic aimed at meeting index inclusion requirements.

On June 8, Jiang Zhuoer, founder of LaBit Pool (B.TOP), wrote: Strategy will not sell large amounts of tokens, only small amounts to pay interest. Strategy issues new STRC to raise funds to buy more BTC, while selling a tiny amount of early low-cost BTC to realize accounting gains, used to pay STRC interest. This is part of its “rolling strategy.” However, if Strategy doesn’t sell at all, investors might suspect “new money is used to pay old interest,” so small sales that generate real income help maintain the “never sell” image and facilitate further financing.

On June 11, Strategy CEO Phong Le told CNBC: The main purpose of selling Bitcoin is to “let the market adapt” and to test internal operational processes. This is not a change in the long-term Bitcoin holding strategy but to verify the smoothness of related transactions and procedures.

Overall, Strategy’s current financial situation is healthy, and it’s likely to sell small amounts of BTC in the future. First, STRC’s annualized dividend yield is about 11.5%. Relying solely on software business profits to pay dividends is clearly insufficient, so Strategy needs to use cash reserves, financing, or BTC sales. Second, as the leading BTC treasury company, large-scale BTC sales would not only cause market panic but also undermine its investment logic. Investors favor Strategy because it offers leveraged BTC exposure. If it continues to reduce BTC holdings, the market will reprice MSTR and STRC.

If BTC prices rise in the future, the de-pegging issue of STRC will be resolved. If BTC continues to decline, Strategy may keep selling small amounts of tokens, raising questions about its ability to pay dividends and whether it needs further financing.

4. Industry Experts’ Opinions

Industry insiders generally remain optimistic about STRC.

• Crypto analyst Murphy wrote: To break the preferred stock, BTC needs to fall to $26,000; to break the debt, it needs to fall to $8,000... In fact, current preferred stocks are not in a payment crisis.
  Similar products like SATA still stay above $99 this week. SATA not de-pegged while STRC did, indicating that the selling pressure is more targeted at Strategy rather than a flaw in these instruments’ design. Strategy is still far from forced liquidation; it’s just that the current price has halted the flywheel. The next price path of BTC will determine whether this is a mid-term pause or the start of a spiral. However, comparing STRC’s de-pegging to the last cycle’s UST de-pegging/LUNA crash, this narrative of a death spiral seems exaggerated. If BTC recovers, ATM equity can reopen, the flywheel can restart; ordinary shares can cover dividends, and cash reserves can be rebuilt—addressing the most dangerous factor in STRC’s discount.

• Crypto pioneer Adam Back stated: The negative views on Strategy and its preferred stock STRC lack basis because what Strategy is doing is essentially just selling Bitcoin to pay “dividends,” without changing its Bitcoin reserve strategy. In fact, it’s proving that Bitcoin can be used to pay returns to investors while reducing debt ratios. Strategy is demonstrating a new financial model where Bitcoin could become an alternative to cash for corporate asset management and capital operations. The FUD around MSTR and STRC is exaggerated; Strategy won’t “go to zero.” Its long-term value lies in holding Bitcoin continuously and helping the market understand Bitcoin’s monetary properties.

• CryptoQuant analyst Axel Adler pointed out: Strategy has essentially shifted from a Bitcoin leverage tool to a complex capital structure risk asset. Currently, it faces four main pressures: Bitcoin falling below average cost, declining financing ability of STRC, selling Bitcoin breaking the “buy-and-hold” narrative, and dilution from stock issuance. Its impact on the Bitcoin market is mildly negative and does not constitute systemic risk; there’s no need for large-scale Bitcoin sales in the short term.

• Mark Palmer, Managing Director and Senior Research Analyst at Benchmark-StoneX, believes: STRC’s weakness is mechanical, not a sign of crisis. When a product’s dividend yield is below the market average, price volatility is normal. At current levels, STRC offers an attractive total return opportunity, combining high yields with an embedded mechanism to bring the price back to par.

• James Butterfill, Research Director at CoinShares, said: The continued weakness of STRC seems less influenced by Bitcoin itself and more by Strategy’s planning on how to fund and manage its growing fixed liabilities. A Bitcoin rebound would boost the value of Strategy’s assets but wouldn’t automatically increase available cash.

Conclusion

After STRC’s de-pegging, the myth of Strategy’s “never sell tokens” has been broken; it may continue small sales to pay dividends, but large-scale Bitcoin sales are unlikely, as that would undermine Strategy’s investment logic. The de-pegging of STRC does not mean Strategy is in trouble, since its Bitcoin reserves far exceed preferred stock liabilities. If Bitcoin enters a bull market again, the de-pegging issue will be resolved; if the bear market persists, Strategy will need to choose between further financing and continued token sales.