STRC preferred stock plunges, forcing Strategy to break the myth of never selling coins. Galaxy: Wise, but addresses symptoms rather than the root cause

"The myth of 'never sell BTC' ultimately cannot withstand the pressure of real-world liquidity? Renowned research institution Galaxy Research released its latest report today (3rd), providing an in-depth analysis of the 'Digital Credit Capital Framework' announced this week by MicroStrategy (Strategy, MSTR). In a bid to rescue its preferred stock (STRC), which had plunged to an all-time low, MSTR unprecedentedly included 'Bitcoin monetization (i.e., selling BTC)' in its capital management toolkit. Analyst Alex Thorn believes that while this breaks the company's faith-based persona, it is a wise move to resolve the cash flow crisis and postpone structural issues.

(Previous context: Citigroup slashes MicroStrategy MSTR target price to $136! Downgrades long-term BTC expectation to $80K, but still maintains 'buy' rating) (Background supplement: MicroStrategy Strategy launches $2 billion capital framework: buyback to support coins, can death spiral concerns be resolved?)

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• Preferred stock crash triggers dollar liquidity crisis
• MSTR's new 'Digital Credit Capital Framework' five tools
• Galaxy Research: Selling BTC is a pressure relief valve, but structural risks remain

MicroStrategy (Strategy), the world's largest corporate Bitcoin whale, is facing a historic turning point in its capital strategy.

According to a weekly research brief released by Galaxy Research Director Alex Thorn on July 3, 2026, Strategy announced a major capital management adjustment on Monday this week, attempting to extinguish the financial backyard fire sparked by Bitcoin's recent decline.

Preferred stock crash triggers dollar liquidity crisis

The trigger for this crisis came from Strategy's flagship preferred stock (STRC). Initially designed to trade near its $100 par value, STRC's price plummeted as Bitcoin underwent a significant correction over the past two months, hitting an all-time low of $71.25 on June 26.

Investors and critics (such as Arca CIO Jeff Dorman) began strongly questioning: With the company's dollar cash reserves rapidly dwindling, what would Strategy use to pay its increasingly burdensome preferred stock dividends? At that point, the company faced three embarrassing options: sell Bitcoin, issue more common stock (diluting MSTR shareholders), or directly suspend preferred stock dividends. This highlighted the contradiction within its capital structure, where MSTR shareholders, BTC holders, and preferred stock holders are 'competing for the same balance sheet.'

MSTR's new 'Digital Credit Capital Framework' five tools

To reverse market panic, Strategy CEO Phong Le declared that the company would 'shift from one-way capital issuance to proactive capital management' and unveiled a new framework comprising five tools:

| Capital Management Tool | | --- | Specific Content and Market Impact | | --- | --- | | USD Reserve Policy | The board approved establishing a cash reserve covering at least 12 months, increasing the cash coverage ratio to approximately 17 months. | | Revised STRC Dividend Policy | Increased the annual dividend rate on STRC preferred stock from 11.5% to 12% (effective July 1) to appease investors. | | Two $1 Billion Buybacks | Authorized up to $1 billion in preferred security buybacks and $1 billion in MSTR common stock buybacks. | | BTC Monetization Plan | Most controversial! Official language explicitly states the possibility of 'occasionally selling BTC' to obtain dollar liquidity. |

The market responded enthusiastically to this move. On the announcement day, MSTR common stock surged 12.6% (to approximately $92.70), while STRC preferred stock also rebounded strongly by 12.2% (to approximately $83.70).

Galaxy Research: Selling BTC is a pressure relief valve, but structural risks remain

Regarding Strategy's self-rescue efforts, Galaxy Research gave a 'wise but treating symptoms rather than root causes' assessment. Alex Thorn pointed out that the market's real concern has never been Strategy's insolvency (the company currently holds up to 847,363 BTC, firmly ranking second globally), but rather 'inadequate dollar liquidity.'

Although this adjustment successfully bought time, Thorn reminded that Strategy still has up to $6.7 billion in convertible bonds maturing between 2027 and 2028. These measures essentially just 'push the problem down the road.'

Regarding the 'sell BTC' option that caused an uproar in the crypto community, Thorn admitted he is not happy to see this development, as MSTR's high premium is built on the extreme leverage faith of 'never selling BTC,' and selling could trigger negative reflexivity effects. However, he also understands the board's dilemma: 'For a company holding nearly 850k BTC, it should never allow a temporary cash flow issue to evolve into a life-or-death existential crisis. If selling a small amount of BTC can prevent capital structure disorder, this is an acceptable defensive measure.'

At the end of the report, Galaxy proposed another alternative path that has not been widely discussed: Strategy should explore generating income by lending out a small amount of segregated BTC under conservative terms, or using options strategies to harvest volatility, without selling spot. In the current weak market that has not yet bottomed, increasing optionality is the best strategy to weather the winter.