Strategy Approaching Pressure Critical Point

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

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

Five weeks later, STRC is now trading at $74, down 26% from par value. I have to admit, this is far more than a slight pressure, especially when combined with the product's various supporting indicators.

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

In my previous analysis, I stress-tested 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 value. But the speed and impact of some bearish scenarios exceeded my expectations.

This article will sort out the complete triggers for this decline and predict STRC's subsequent price trend.

Even though Strategy added 3,600 Bitcoins over the past four weeks, the total market value of its Bitcoin holdings still shrank by 25%. During this period, the total market capitalization of the broader crypto market and Bitcoin itself both evaporated by about 20%, and these were originally the underlying core logic supporting market optimism for STRC.

STRC had never fallen below $90 since issuance, but from $99 on June 1 to $74 on June 26, the product price fell day after day for 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 only breached the 10% threshold 7 times. But within just 19 trading days, its implied volatility skyrocketed nearly tenfold, from 8.22% to 78%.

Looking past the numbers, market perception of STRC has undergone a disruptive transformation over the past month. Unlike Bitcoin's high volatility, STRC was originally positioned as a financial product with stable performance and very low volatility. Strategy packaged it as a credit instrument with a stable price near $100 and stable dividend distributions, and the first few months indeed met this expectation. But over the past 30 days, STRC's daily closing price has continued to decline; this product, stable around $100 for months, is now only worth $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 unattainable.

Impact on Strategy

The most direct consequence is that the company's financing machine, on which its expansion depends, is under pressure.

When STRC's price was maintained around the $100 par value, Strategy could issue new shares through its at-the-market (ATM) offering program, raise funds, and then buy more Bitcoins. This positive cycle was the foundation of all the company's expansion moves. But now that the market is only willing to pay $74 for a share with a par value of $100, the company still has to pay 11.5% dividends based on the $100 par value, while actually receiving only $74 in cash. No company would willingly absorb such a loss, so the ATM offering program has been fully suspended, and the growth flywheel of continuously accumulating coins using 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 → Buy more Bitcoin → Bitcoin rises → Market confidence increases → Issue more STRC. At that time, I considered the reverse collapse only as an extreme tail risk scenario, and it's been less than six weeks since that assessment.

But STRC holders have priority dividend rights, and the company must still use cash reserves to pay dividends, or in extreme cases, even sell its Bitcoin holdings to do so.

In May, Strategy's cash reserves fell to $871 million, a 60% drop from the $2.25 billion when my previous article was published. Previously, the company spent about $1.38 billion in cash to repurchase convertible notes due in 2029 with a total principal of $1.5 billion. Cash reserves subsequently recovered to about $1.4 billion, including expected proceeds from shares already sold under the ATM program but not yet settled.

In comparison, the annualized preferred stock dividend payment on the full STRC product has already exceeded $1.2 billion; if combined with payment obligations from other debt instruments, the overall payment pressure would increase further.

Relying on its marketable Bitcoin holdings, Strategy is still far from insolvency, but the real core crisis is not about book numbers; it's about the continuous loss of investor confidence in its various financial products.

How to Restore Investor Confidence

An increasing number of voices in the crypto community believe that Strategy should significantly reduce its Bitcoin holdings to restore market confidence, but this move is actually a double-edged sword.

STRC's underlying design goal is to trade stably at $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 staying close to par value.

If Strategy wants to restore investor confidence in STRC and pull its price back from $74 to the $100 par value, it must raise the dividend rate to make the product more attractive. But raising the dividend rate means dividend expenses will increase simultaneously. Based on the current outstanding STRC scale, every 50 basis point increase in dividends would add approximately $50 million in annual payment pressure.

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

The payment obligation is just a bookkeeping calculation, but reducing some Bitcoin holdings would pose a huge psychological dilemma for Strategy.

In 2025, dozens of companies copied Strategy's Digital Asset Treasury (DAT) operating model: issuing stock, buying Bitcoin, with stock prices persistently trading above net asset value, and using that valuation premium to continue financing. And after the sharp drop in Bitcoin prices, almost all copycat companies stopped accumulating coins, and the valuation premium completely disappeared.

The key reason Strategy was able to weather that market cycle was that it never sold its Bitcoin. The "never sell" commitment was the foundation supporting investor belief in the entire capital structure.

But now this commitment has completely reversed. Although Strategy as a whole is still net adding to its Bitcoin holdings, Michael Saylor explicitly stated during the company's Q1 earnings conference call: the company may sell Bitcoin holdings to pay dividends.

In the month-plus after this statement, investors did not show significant concern. But on June 1, selling just 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 plunged 45%. In fact, MSTR's stock price even fell below the $100 mark for the first time in over two years.

The psychological dilemma for potential investors stems from this.

Strategy could indeed solve short-term dividend payment problems by selling Bitcoin, and from a financial book perspective, it is feasible. The company holds a huge Bitcoin inventory; selling only a small portion to pay preferred stock dividends would not create insolvency risk. But the valuation of a listed company is never determined solely by book data; the core narrative the company projects externally profoundly affects the valuation level the market gives. Strategy's core narrative has always been: Continuously accumulate coins through bull and bear markets, never sell during downturns, and continuously add Bitcoin through capital markets.

Once the company significantly breaks the "never sell" principle, every time cash reserves shrink and STRC price falls, 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 coins, investors worry about where the money will come from to pay dividends; but if they choose to sell, investors will question that the "Bitcoin holdings are never touched" core narrative is invalid. The former impacts cash flow fundamentals, the latter shakes the long-term story that investors trusted when buying the company's assets.

This is the self-referential feedback loop I mentioned in my previous article. Even if the company's fundamentals appear sound, the market confidence that supports the stable operation of products like STRC can also destroy it. Even now, ample cash reserves and Bitcoin holdings are enough to keep the company away from bankruptcy risk, but simply the continuous erosion of investor confidence could lead to no one willing to buy STRC, causing its price to free-fall.

The DATs that copied Strategy in 2025 fell into the exact same logic. Once these coin-holding companies sell Bitcoin during a downturn, the valuation premium instantly disappears, the equity issuance financing channel completely closes, and the stock valuation directly turns to a discount. If Strategy repeats the same mistake with STRC, it would replicate the tragedy of 2025, and this time its own entire capital structure would be damaged.

Looking Beyond Strategy's Crisis

Leaving aside this specific company, this incident also reveals what chain reactions the entire industry might face, beyond the STRC product itself.

Over the past month, the total market capitalization of the crypto market has evaporated by about 20%; Bitcoin ETFs have seen net outflows for seven consecutive weeks, the longest outflow period since the product's inception. The Federal Reserve has turned hawkish, and the May PCE inflation reading reached 4.1%. Although these factors are not directly related to Strategy, the collapse of STRC's price happened to occur in such a macro environment, and the mutual drag forming a negative cycle is undeniable.

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

With the popularity of perpetual contracts, retail investors can easily leverage trade with only a small margin. In the past, investors had to rely on MSTR stock to leverage Bitcoin; now perpetual contracts can fully 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 collapse. The market demand for this product continues to weaken, and its core credit narrative has completely broken down. Investors no longer believe Strategy can maintain this closed loop: using funds raised by issuing the same debt product to pay dividends on that product. After this cycle mechanism broke, MSTR stock was also dragged down. Currently, MSTR's valuation premium over net asset value has almost disappeared, trending towards par, meaning the market no longer believes this company has additional value beyond its underlying assets.

This logic completely overturns Strategy's previous operating structure. For years, Bitcoin prices drove the company's stock price, the stock price determined the company's financing ability, and the funds raised were used to buy more Bitcoin. Now the situation has reversed: The creditworthiness of the debt product influences the stock price, and the stock price in turn affects market judgment of its Bitcoin holdings' value. It is completely upside down.

This raises a question I never anticipated in my previous article: If STRC's trend increasingly depends on Strategy's own credit rather than Bitcoin's price, what will become of the dozens of Bitcoin DAT financial products that followed?

The closest competitor to STRC's structure, SATA preferred shares issued by Strive, hit an all-time low of $79 in the same week. SATA has an annualized dividend rate of 13%, paid daily. Strive holds approximately 19,800 Bitcoins, with an average cost of $96,000, which is 60% higher than the current price. The company has no debt, no convertible bond selling pressure, no concentrated maturity risk, yet its price has still fallen below par value.

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

Even SATA, with zero debt and a cleaner structure, cannot hold par value. This shows the problem is not unique to Strategy. The market may be re-pricing the entire category: these products are essentially not Bitcoin substitutes or crypto speculative vehicles, but credit-based debt instruments, naturally carrying the various fragility risks of credit assets.

If everything were based solely on fundamentals, Strategy would still have a chance to turn around. Once Bitcoin returns to $80,000, the collateral value narrative 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 capacity, the mere collapse of investor confidence is enough to trigger panic and cause a sell-off across all related assets in the category.

Translator's Note: According to the latest news, Strategy has announced a new capital framework, including a $1 billion digital credit securities repurchase program to optimize its capital structure. At the same time, the company's board of directors approved a Bitcoin monetization plan, intending to raise up to $1.25 billion through related operations to bolster its dollar reserves. Michael Saylor stated that the board authorized Strategy to sell Bitcoin from time to time for three primary purposes:

• Supplement dollar reserves: Generate up to $1.25 billion in additional proceeds to bolster dollar reserves (current reserve balance is about $2.55 billion, already including some unsettled ATM sales proceeds).
• Pay preferred stock dividends and interest: Use BTC sale proceeds to pay dividends/interest when more advantageous than issuing new shares or other financing, or to replenish reserves after payment.
• Support repurchases: Fund the aforementioned preferred stock and common stock repurchase programs (including related taxes and transaction costs).

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 beginning on or after July 1, 2026. This adjustment does not affect previously declared but unpaid STRC dividends.