Will the issuance price of STRC, discussed with ChatGPT, fall into a death spiral?

Author: Chloe, ChainCatcher

Since the Strategy launched STRC at the end of July 2025, Bitcoin has fallen about 40%, nearly 50%. This preferred stock, designed to trade "close to a $100 face value," is now deeply discounted: during last Thursday's intraday session, it hit a historic low of $82.53, and closed at only $88.59, still about 13% below face value. As the discount widens, STRC's effective yield has risen above 12.9%, approaching 13%.

The Smarter Web Company Bitcoin Strategy Director Jesse Myers said, "Strategy is fine," while economist Peter Schiff once again called the entire structure a "typical centralized Ponzi scheme."

So, those old questions are back: Will Strategy be forced to sell coins? Is the flywheel it relies on for expansion actually a Ponzi scheme?

Is STRC an AI-designed mechanism?

To discuss STRC, we first need to talk about a detail that is often overlooked but has re-emerged amid this decline: this structure was chat-developed by Saylor and AI.

The controversy stems from a segment of a May CoinDesk interview that circulated again on X. Saylor admitted in the clip that he heavily used artificial intelligence when developing the Strategy preferred stock product. He said that when doing Stretch, these things were all designed with AI, and he couldn't do it alone; he spent hours discussing back and forth with AI.

According to him, he kept throwing various structural setups at AI, testing whether some non-typical ideas would hold up legally. When he said, "I want a preferred stock that pays monthly dividends and stays stable at $100," AI responded: "No one has ever done this before, but it’s completely legal and reasonable."

Interestingly, when STRC broke below face value and the market started questioning whether this mechanism could hold, many foreign media simply went back to ask AI, including ChatGPT, Grok, and Claude, whether STRC could bounce back to $100.

Will Strategy sell coins again?

Not long ago, Strategy sold 32 BTC, worth about $2.5 million, to cover dividend obligations. This amount is insignificant compared to its overall Bitcoin reserve, but it proved one thing: when the financing efficiency led by STRC declines, cash obligations can indeed force limited coin sales.

More concerning is the freezing of buying activity. Strategy’s pace of increasing Bitcoin holdings has clearly slowed: in April, it bought $2.54 billion worth of 34,164 BTC in a single week; in May, it added about $2.01 billion for 24,869 BTC. But by June, weekly purchases shrank to around $100M. During the week ending June 8, it bought 1,550 BTC ($101 million); by June 15, it bought another 1,587 BTC ($100 million), bringing total holdings to 846,842 BTC.

Additionally, the discount widening not only boosts yields but also halts the "at-the-market" issuance (selling new shares at current market price in tranches to raise cash), which is a key part of the Bitcoin flywheel.

However, the bulls dismiss this "death spiral" narrative. Jesse Myers believes that this wave of STRC selling looks more like a leverage unwind rather than a deterioration of fundamentals. He estimates that, if conditions remain unchanged, Strategy’s current state alone could cover STRC dividends for up to 32 years; as long as Bitcoin appreciates about 2% annually, this obligation could be indefinitely sustained. Moreover, the issuance tool itself hasn't disappeared—if at-market issuance is temporarily halted, Strategy still has multiple backup financing options, including restarting MSTR common stock issuance or using cash reserves, and only resorting to selling coins if necessary.

The bears, like Schiff, stick to their classic script. He argues that if Saylor pushes yields to 13%, he would need to sell more MSTR at a bigger discount to finance it; if yields aren’t increased, STRC’s price will continue to fall. In his view, the only way to break this death spiral is to cancel dividends outright, but that would immediately crush STRC, dragging MSTR and Bitcoin down with it.

Is this flywheel really a Ponzi scheme?

Schiff’s accusation is straightforward: STRC is a "typical centralized Ponzi" because its operation depends on Strategy continuously raising new money through a new round of share issuance or simply selling Bitcoin to meet obligations. Even trader DonAlt publicly questioned why STRC’s price, after breaking below face value, "trades like a Ponzi."

Strategy has not directly responded to such accusations, merely continuing to position STRC as a preferred stock backed by its Bitcoin DAT strategy. A more concrete move has been to switch STRC from monthly dividends to semi-monthly, i.e., twice a month.

The counterargument centers on "leverage unwind." Myers points out that the problem isn’t the structure itself but that STRC has been trading around $99–$100 for a long time, tempting investors to leverage heavily, many expecting it to stay above $95; once the price drops, margin calls and forced liquidations amplify and accelerate the decline.

Analyst Scott Melker offers another perspective: the discount might actually attract yield-seeking buyers. Because STRC’s dividends are calculated based on a $100 liquidation preference, not the market price. At an 11.5% dividend rate, buying at $90 yields about 12.8%; at $85, about 13.5%. The deeper the discount, the higher the effective yield, which is itself an incentive.

Therefore, whether it’s a Ponzi ultimately depends on market belief: one view is that this mechanism can only operate by continuously bringing in new money, with new investors’ funds used to pay earlier investors—characteristic of a Ponzi. The other view is that the tool itself isn’t flawed; it’s just that everyone previously thought it was very stable and borrowed to add positions, but when the price drops, these investors are forced to cut losses, magnifying the decline. This is a one-time shakeout, not a flaw in the tool.

Will semi-monthly dividends officially take effect, and will the answer be revealed by June?

Reviewing what’s above, since this mechanism was designed by Saylor with AI, many foreign media simply asked AI the same question: Can STRC return to $100, and what should Strategy do to rebuild market confidence? The common answers from ChatGPT, Grok, and Claude are, “Returning to $100 requires conditions.”

ChatGPT believes it’s still possible but needs stronger market confidence, sustainable dividend coverage, and a rebound in Bitcoin prices—all three factors. It emphasizes that the fastest recovery path is to restore investor belief that dividends can be maintained without asset sales; if further coin sales are needed, confidence might deteriorate further.

Grok is the most cautious, saying “Maybe, but it would be extremely difficult.” It sees the core question as whether the engine powering this coin-buying machine can still run. It believes a sustained Bitcoin rally would be the most effective catalyst; otherwise, prolonged weakness would weigh on both STRC and MSTR.

Claude points out that preferred stocks can often recover to face value from discounts, but only if investors believe the issuer can meet its long-term obligations. “Recovery is possible, but what the market needs to see is evidence that this structure can operate in adversity, not just when Bitcoin is rising.”

So, does this strategy have a fundamental problem? Whether you’re bearish like Schiff, bullish like Myers, or relying on top AI models, the key variable is whether Strategy can continue paying dividends without selling coins.

The flywheel isn’t stopped yet, but it’s clearly slowing: at-market issuance has paused, coin-buying has shrunk from tens of billions weekly earlier this year to about $100M weekly in June; that $32 BTC sale further proves that when issuance stalls, “selling coins to pay interest” is an open door. Whether it’s a Ponzi or a one-time leverage shakeout depends on whether STRC can regain face value and what Strategy relies on to pay interest.

The most specific observation point is June 30: on that day, semi-monthly dividends officially took effect, but the real focus is on the automatic dividend rate adjustment rule based on price. If the average price for the month drops below $95, it suggests increasing the dividend rate; only above $99 would it stop. Now, with the price below $95, a further increase is almost certain, and the dividend yield has risen from 9% in August 2025 to 11.5%.

This is the core of Schiff’s death spiral: the lower the price, the more the mechanism automatically pushes the dividend rate higher, increasing the cash burden, which can only be offset by issuing more shares or selling more coins. Whether this mechanism is a “stabilizer” or a “accelerator” depends on the upcoming price and interest rate movements.