Given the important role of Strategy within the crypto ecosystem—both financially and in terms of sentiment—it is possible that this turmoil at the company has also contributed to weakness in Bitcoin itself, exacerbating the problem.
In our view, Strategy did make some significant mistakes in its execution of its digital credit strategy that made matters worse for itself.
But with Bitcoin now stabilizing (if not recovering) and many of these missteps now getting addressed, Strategy could be on the cusp of a key inflection point.
The various digital credit instruments issued by Strategy, including the 8% Perpetual Preferred (STRK), which we have written about previously (see here), stand to benefit from recovering investor confidence in the business model.
Investors who remain confident in the long-term success of Bitcoin should consider these high-income opportunities carefully.
The company has taken several important steps to de-risk its preferred stock securities, yet investors are still being highly compensated to bear the risk associated with them. Dividend yields across the different options are currently in the 10% to 16% range.
What went wrong
The core problem affecting MSTR has, of course, been the decline in Bitcoin.
Strategy’s financial model works extraordinarily well when Bitcoin has positive momentum.
As Bitcoin goes up, the value of its assets increases, the premium at which the common shares trade relative to the value of the Bitcoin holdings tends to expand, and the company can issue new securities on attractive terms to acquire even more Bitcoin.
The process becomes self-reinforcing. But the same dynamic unfortunately operates in reverse.
As Bitcoin declined since last summer, the premium investors were willing to pay for MSTR (which the company refers to as mNAV, basically market cap divided by Net Asset Value) contracted. It went from approximately 100% (in other words, the shares were valued at around twice the Bitcoin on the balance sheet) to essentially no premium at all.
The declining premium made issuing common stock less attractive and placed greater importance on Strategy’s digital credit instruments—particularly its Variable Rate Perpetual Preferred (STRC).
STRC began trading on July 30, 2025, just a few weeks after the MSTR share price peaked. Since then, STRC has become the centerpiece of Strategy’s capital-raising model.
STRC has a par value of $100. The company adjusts the dividend rate on STRC with the objective of keeping the shares trading close to the $100 stated value. If STRC remains near $100, Strategy can issue more of it and use the proceeds to acquire Bitcoin.
STRC falters
Without explicitly promising investors that STRC will always stay at or close to its $100 par value, Strategy did set expectations around that assumption. So when STRC began to trade substantially below $100 this spring, the machinery began to break down….
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