Strategy Nears Pressure Threshold

Author: Prathik Desai; Source: TokenDispatch; Translation: Shaw, Golden Finance

On May 21, I put forward a view in the article "Strategy's Capital Alchemy": the STRC preferred stock debt product issued by this company, which holds a massive Bitcoin inventory, would first come under pressure and deform, but would not directly collapse. I wrote at the time that STRC's design benchmark trading price was $100, and under adverse conditions the price would come under pressure and weaken, but it would most likely hold steady.

Five weeks later, STRC's price has now dropped to $74, down 26% from its par value. I have to admit, this is no longer just a slight pressure, especially when combined with the various supporting indicators of this debt product.

Just ten days after I published that article, Michael Saylor sold 32 Bitcoins, then worth about $2.5 million. This was the first time in years that Strategy had reduced its own Bitcoin inventory. Although this sale had almost no substantive impact on its $65 billion Bitcoin holdings, the market environment Strategy is in has undergone a huge shift, and this will profoundly change the company's own development situation.

In the previous analysis, I conducted stress tests on various bearish scenarios, all of which could shake the core logic of this debt product while breaking the positive self-reinforcing cycle that kept STRC's price stable at par. However, the speed and impact of some bearish scenarios exceeded my expectations.

This article will sort out the complete causes of this decline and predict the subsequent price trend of STRC.

Even though it added 3,600 Bitcoins in the past four weeks, the total market value of Strategy's Bitcoin holdings still shrank by 25%. During this period, the total market cap of the crypto market and Bitcoin itself both evaporated by about 20%, and these were the underlying core logic supporting the market's optimism toward STRC.

STRC's price had never fallen below $90 since issuance, but from $99 on June 1 to $74 on June 26, the product's price fell day after day for multiple consecutive days.

Implied volatility is a forward-looking indicator reflecting market sentiment and future expectations. In the three months before the company's first Bitcoin sale, this indicator broke through the 10% threshold only 7 times. But in just 19 trading days, its implied volatility surged nearly tenfold, from 8.22% to 78%.

Looking beyond the numbers, the market's perception of STRC has undergone a disruptive transformation in the past month. Unlike Bitcoin's high volatility, STRC was originally positioned as a stable, low-volatility financial product. Strategy packaged it as a credit instrument with a stable price around $100 and stable dividend payments, and the previous months' performance indeed matched this expectation. But over the past 30 days, STRC's daily closing price has continued to decline; this product, which had been stable around $100 for months, now trades at only $74. Its 30-day historical volatility surged from 4.3% to 34.6% in one month.

Although Strategy has not yet missed any STRC dividend payment, the core change is: now the volatility of this product has exceeded that of Bitcoin, the risky asset it was supposed to help investors hedge against. The stable returns promised to potential investors are now completely unfulfillable.

Impact on Strategy

The most direct consequence is that the financing machine the company relies on for expansion has come under pressure.

When STRC's price remained near its $100 par value, Strategy could issue new shares through its at-the-market (ATM) offering plan, raise funds, and then increase its Bitcoin holdings. This positive cycle was the foundation of all the company's expansion actions. But now the market is only willing to pay $74 for a share with a $100 par value, meaning the company still has to pay an 11.5% dividend based on the $100 par value, while actually receiving only $74 in cash. No company would willingly take such a loss, so the ATM issuance has been completely suspended, and the growth flywheel that relied on continuous Bitcoin accumulation through preferred stock funds has stopped.

Between March 18 and May 18 this year, the nominal total value of outstanding STRC preferred shares doubled from $5 billion to $10.5 billion, but since then the company has not issued any more shares.

In my previous article, I outlined the positive cycle logic: Issue STRC → Increase Bitcoin holdings → Bitcoin rises → Market confidence increases → Issue more STRC. At that time, I considered the reverse collapse only as an extreme tail-risk scenario, and that was less than six weeks ago.

However, STRC holders have priority dividend rights, and the company must still use cash reserves to pay dividends, or in extreme cases, sell off Bitcoin holdings to make payments.

In May, Strategy's cash reserves fell to $871 million, a 60% drop from the $2.25 billion at the time of my previous article. Previously, the company used about $1.38 billion in cash to repurchase $1.5 billion in principal of convertible notes due 2029. Subsequently, cash reserves rebounded to about $1.4 billion, including expected proceeds from shares sold under the ATM but not yet settled.

In comparison, the annualized preferred stock dividend payments for the entire STRC product have exceeded $1.2 billion; when combined with other debt instrument obligations, the overall payment pressure is further amplified.

Relying on its liquid Bitcoin holdings, Strategy is still far from insolvency, but the real core crisis is not the numbers on the books, but the continuous loss of investor confidence in its various financial products.

How to Rebuild Investor Confidence

An increasing number of voices in crypto community forums believe that Strategy should sell off a large portion of its Bitcoin holdings to restore market confidence, but this is actually a double-edged sword.

STRC's underlying design goal is to trade stably at a $100 par value, and the company's entire capital cycle of raising funds through issuance and paying dividends is entirely based on STRC's market price being close to par.

If Strategy wants to rebuild investor confidence in STRC and pull its price back from $74 to $100 par, it must raise the dividend rate to make the product more attractive. But raising the dividend rate means a simultaneous increase in dividend expenditures. Based on the current outstanding STRC size, each 50-basis-point increase in the dividend would add about $50 million in annual payment pressure.

Raising the dividend might attract enough buyers to take over STRC, but if so, the company would have to repeat the operation from June 1: sell more Bitcoin holdings to pay dividends.

The payment obligation is just a book calculation, but selling off some Bitcoin holdings would create a huge psychological dilemma for Strategy.

In 2025, dozens of companies copied Strategy's Digital Asset Treasury (DAT) operating model: issue stocks, buy Bitcoin, keep stock prices above net asset value for a long time, and rely on this valuation premium for continuous financing. And after Bitcoin's price plummeted, almost all follow-the-leader companies stopped accumulating coins, and the valuation premium completely disappeared.

The reason Strategy was able to survive that round was precisely that it never sold Bitcoin. The "never sell" commitment was the foundation that supported investor belief in the entire capital structure.

But now this commitment has been completely reversed. Although Strategy as a whole is still net accumulating Bitcoin, Michael Saylor explicitly stated during the company's first-quarter earnings call: the company may sell Bitcoin holdings to pay dividends.

In the month and more after this statement, investors did not show obvious concern. But on June 1, selling only 32 Bitcoins—less than 0.004% of its total Bitcoin holdings—severely damaged market confidence.

Since this sale of 32 Bitcoins, STRC's price has fallen 25%, and the company's common stock MSTR has plummeted 45%. In fact, MSTR's stock price fell below $100 for the first time in over two years.

The psychological dilemma for potential investors stems from this.

Strategy can indeed solve the short-term dividend payment problem by selling Bitcoin, and it is feasible from a financial book perspective. The company holds a huge amount of Bitcoin, and only needs to sell a small portion to pay preferred stock dividends, without any risk of insolvency. However, the valuation of a listed company is never determined solely by book data; the core narrative the company communicates externally profoundly affects the market's valuation. Strategy has always communicated the core narrative: continuously accumulate coins through bull and bear cycles, never sell during downturns, and continuously increase Bitcoin holdings through capital markets.

Once the company breaks the "never sell" line on a large scale, every time cash reserves shrink and STRC prices fall, the market will ask the same question: "Will they sell Bitcoin again?"

This is the root of the dilemma: If Strategy insists on not selling, investors will worry about where the money will come from to pay dividends; but if they choose to sell, investors will question the core narrative that "Bitcoin holdings are never touched." The former impacts cash flow fundamentals, while the latter shakes the long-term story that investors originally relied on when buying the company's assets.

This is the self-reinforcing feedback loop I mentioned in my previous article. Even if the company's fundamentals seem solid, the market confidence that supports the stable operation of products like STRC can also destroy it. Even now, ample cash reserves and Bitcoin holdings may keep the company far from bankruptcy risk, but the mere continuous loss of investor confidence can lead to no one in the market willing to buy STRC, causing its price to fall freely.

In 2025, the many DATs that imitated Strategy fell into exactly the same logic. Once these coin-holding companies sold Bitcoin during a downturn, the valuation premium instantly disappeared, the financing channel through issuance completely closed, and the stock valuation directly turned to a discount. If Strategy repeats this mistake with STRC, it would be a replay of the tragedy of 2025, but this time it harms its own entire capital structure.

Looking Beyond Strategy's Crisis

Beyond this company itself, this incident also reveals what kind of chain reaction the entire industry may face, aside from the STRC product.

In the past month, the total market cap of the crypto market as a whole has evaporated by about 20%; Bitcoin ETFs have seen net outflows for seven consecutive weeks, the longest outflow period since the product's launch. The Federal Reserve has turned hawkish, and the May Personal Consumption Expenditures (PCE) price index inflation reading reached 4.1%. While none of these factors are directly related to Strategy, the collapse of STRC's price happened precisely in such a macro environment, and it is an indisputable fact that the two are dragging each other down in a negative cycle.

Now that major exchanges provide great convenience for ordinary retail investors to gain Bitcoin exposure, funds may also be rotating: investors are withdrawing from indirect Bitcoin holdings such as ETFs, DATs, and Strategy, which are high-cost and less stable Bitcoin derivatives.

With the popularity of perpetual contracts, retail investors can easily trade with leverage using only a small margin. In the past, investors could only rely on MSTR stock to leverage Bitcoin; now perpetual contracts can completely replace this demand. The correlation between MSTR, STRC, and Bitcoin prices continues to weaken, while Bitcoin perpetual contracts are almost perfectly synchronized with spot prices. Comparing the two, investors naturally prefer perpetual contracts over indirect holdings.

But STRC's current predicament stems from its own logic collapsing. The market demand for this product continues to weaken, and the core reason is the complete breakdown of its credit narrative. Investors no longer believe that Strategy can maintain this closed loop: raising funds by issuing the same debt product and then using that money to pay the product's own dividends. After this cycle broke, MSTR's stock price was also dragged down. Currently, MSTR's valuation premium relative to net assets has almost disappeared, approaching parity, meaning the market no longer believes this company has additional value beyond its underlying assets.

This logic completely overturns the operational structure Strategy has relied on for years. For years, Bitcoin's price affected the company's stock price, which in turn determined the company's financing ability, and the funds raised were used to buy more Bitcoin. Now the situation has reversed: the credit credibility of the debt product influences the stock price, which in turn affects the market's judgment of the value of its Bitcoin holdings. It's completely putting the cart before the horse.

This leads to a question I never expected in my previous article: If STRC's trend becomes more and more dependent on Strategy's own credit rather than Bitcoin's performance, then where will the dozens of Bitcoin DAT financial products that follow suit go?

The most similar competitor to STRC's structure, the SATA preferred stock issued by Strive, hit an all-time low of $79 in the same week. SATA has an annual dividend yield as high as 13%, paid daily. Strive holds about 19,800 Bitcoins, with an average cost of $96,000, 60% above the current price. The company has no debt, no convertible bond selling pressure, and no concentrated maturity risk, yet its price still fell below par.

Metaplanet, headquartered in Tokyo, Japan, holds over 40k Bitcoins and has also issued its own preferred stock product, MARS.

Even SATA, which has zero debt and a cleaner structure, cannot hold its par value, indicating that the problem is not unique to Strategy. The market may be repricing the entire category: these products are essentially not Bitcoin substitutes or crypto speculative targets, but credit debt instruments, naturally carrying various vulnerabilities of credit assets.

If everything were based solely on fundamentals, Strategy would still have a chance to turn things around. Once Bitcoin returns to $80,000, the narrative of collateral value would theoretically re-establish itself, and the ATM issuance channel would reopen. But reality is not that simple.

Even if the total amount of Bitcoin the company plans to sell in the future is far less than the market's daily trading volume absorption capacity, the mere collapse of investor confidence is enough to trigger panic and cause a sell-off of all related assets in the entire category.

_Translator's note: According to the latest news, Strategy has announced a new capital framework, including a $1 billion digital credit securities repurchase plan to optimize its capital structure. At the same time, the company's board approved a Bitcoin monetization plan, aiming to raise up to $1.25 billion through related operations to bolster its U.S. dollar reserves. Michael Saylor stated that under the plan, the board authorized Strategy to sell Bitcoin from time to time for three main purposes:  _

• Supplement U.S. dollar reserves: generate up to $1.25 billion in additional proceeds to strengthen dollar reserves (current reserve balance is about $2.55 billion, including some unsettled ATM sales).

• Pay preferred stock dividends and interest: when more favorable than issuing new shares or other financing, use BTC sale proceeds to pay dividends/interest, or replenish reserves after payment.

• Support repurchases: fund the above preferred and common stock repurchase plans (including related taxes and transaction fees).

In addition, according to Strategy's 8-K filing with the U.S. SEC, Strategy will increase the annual regular dividend rate on its Floating Rate Series A Perpetual Preferred Stock ("STRC") to 12.00% for semi-monthly dividend payment periods starting on or after July 1, 2026. This adjustment does not affect previously declared but unpaid STRC dividends.