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From STRC Depegging to Digital Credit: Strategy's Financing Framework Is Undergoing a Stress Test

Author: CoinW Research

Source: CoinW Research Institute

Strategy has recently returned to the market spotlight. The surface trigger was the company’s release of its Digital Credit Capital Framework, but the deeper cause lies in the fact that its core preferred equity financing instrument, STRC, has visibly deviated from its $100 target price—raising market concerns about the sustainability of the Digital Credit model.

STRC was originally designed as a short-duration, high-yield credit instrument intended to trade around its $100 stated amount and served as a critical tool for Strategy to raise capital to continue purchasing Bitcoin. However, as STRC fell below $90—and at one point even lower—investors began reassessing Strategy’s cost of capital, dividend-paying capacity, the necessity of Bitcoin monetization, and whether MSTR common shares could still sustain a premium. This article will analyze whether Strategy’s capital structure can still maintain a virtuous cycle from four perspectives: the evolution of its financing instruments, reasons behind STRC’s discount, core market concerns, and potential resolution pathways.

1. From STRC Depegging to the Digital Credit Framework: Why Is Strategy Being Repriced?

2. Why does Strategy need continuous fundraising?

3. Timeline of fundraising events: How has Strategy progressively upgraded its financing tools?

4. How does Strategy build a capital flywheel? What role does each financing instrument play?

5. STRC is a signal of whether Strategy’s capital structure can sustain low-cost expansion.

6. Digital Credit Framework: How is Strategy restoring confidence in STRC?

7. The market’s core concern: Are there solutions to these issues?

8. The real test: Can STRC and MSTR re-establish a virtuous cycle?

Reference

For several years, the market believed Strategy’s financing model could operate almost indefinitely: issue securities → raise capital → buy Bitcoin → share price rises → refinance. However, in June 2026, the market began questioning whether this model remained sustainable. The trigger was not Bitcoin’s price, but the persistent discount on STRC (Stretch Preferred Stock).

STRC is Strategy’s floating-dividend perpetual preferred stock and one of the most important financing instruments within its Digital Credit framework. Its operational model resembles that of a publicly listed company continuously issuing preferred shares to raise capital: Strategy issues new STRC units, investors subscribe by paying cash, and the company pays dividends on schedule. The proceeds are then used to purchase additional Bitcoin or replenish corporate liquidity. Thus, as long as STRC continues trading near its par value, the company can sustainably raise capital through new STRC issuances, creating a stable funding channel. According to Strategy’s design, STRC carries a $100 stated amount, and the company aims to keep its market price trading around $99–$100 over the long term through dynamic dividend rate adjustments, semi-monthly payouts, and active capital management. When the market price approaches $100, new share issuance achieves maximum financing efficiency; however, if prices persistently fall below this level, new issuances must be offered at a discount, weakening the company’s fundraising capacity. Importantly, the $100 level is neither a redemption guarantee nor a stablecoin-style peg. Strategy’s official documentation explicitly states that the company does not guarantee STRC’s market price, liquidity, or future returns. Therefore, what the market refers to as 'STRC de-pegging' is more accurately described as STRC’s market price falling significantly below the trading range the company seeks to maintain, thereby diminishing the instrument’s financing efficacy.

In late June 2026, amid persistent market concerns about Strategy’s cash flow, preferred dividend obligations, and financing capacity, STRC briefly fell to approximately USD 73—representing a roughly 27% discount to its USD 100 stated amount. This indicated that investors were demanding higher risk compensation and reflected the market’s reassessment of Strategy’s credit quality and financing ability. Concurrently, Strategy’s common stock (MSTR) also came under pressure. As fears grew that the company’s preferred stock financing capacity was deteriorating—and that it might need to resort to additional common equity issuance or even Bitcoin sales to bolster cash reserves—MSTR’s share price experienced a sharp correction in a short period, rapidly intensifying investor concerns about the firm’s capital structure.

STRC’s deviation from its target trading range of USD 99–100 results from a combination of multiple factors.

First, STRC lacks a hard redemption anchor. The USD 100 figure represents the stated amount and the company’s desired trading target, not a guaranteed redemption price. Once investors recognize that it is not a stablecoin-style peg, they reprice it according to credit product logic.

Second, the yield demanded by the market has risen. A 12% dividend may sound high, but investors require compensation not only for interest rate risk but also for Bitcoin volatility, Strategy’s credit risk, liquidity discounts, and uncertainty around future buybacks or dividend adjustments. If these risks increase, even a 12% yield may be insufficient to bring the price back to USD 100.

Third, the investor base and trading structure may amplify volatility. Some of the selling pressure on STRC stems from retail investors and leveraged position adjustments. When a novel preferred stock product is held heavily by income-seeking or leveraged capital, price declines can trigger forced selling, further widening the discount.

Fourth, declines in Bitcoin and MSTR erode confidence in the financing flywheel. STRC ultimately relies on Strategy’s creditworthiness, which in turn is highly dependent on the value of its Bitcoin holdings and MSTR’s ability to raise capital. Should Bitcoin trade sideways or decline, compressing MSTR’s marked-to-market net asset value (mNAV), STRC investors will naturally demand higher yields as compensation.

Fifth, as the scale of preferred stock grows, the market begins to worry about the cash burden. STRC, STRF, STRD, and STRK all require dividend payments, while debt incurs interest expenses—but Bitcoin itself generates no cash flow. The larger the preferred stock base becomes, the more investors scrutinize whether the USD Reserve is sufficient and whether Bitcoin monetization will become routine.

The impact of STRC’s discount is also direct: it weakens STRC’s continued utility as a financing tool and raises the cost of future preferred stock issuance for Strategy. If the company continues to increase dividends, its cash burden grows; if it repurchases STRC, it can reduce future dividend obligations and provide price support—but this requires using cash and could even necessitate Bitcoin monetization.

In the past, Strategy could continuously issue STRC securities to raise capital close to par value and then use the proceeds to keep buying Bitcoin or optimize its capital structure. However, if STRC trades persistently at a 20–30% discount, the company would need to offer investors either higher yields or lower issuance prices for any new similar securities, significantly increasing its financing costs and slowing down the Digital Credit flywheel. Thus, what the market truly worries about is not STRC itself, but whether Strategy can sustain its historical model—relying on continuous capital market fundraising to expand its Bitcoin holdings—if its preferred equity financing channel becomes ineffective.

In response to this issue, on June 29, 2026, Strategy formally launched the Digital Credit Capital Framework, aiming to demonstrate to the market that the company has transitioned from 'one-way financing' to an 'active capital management' phase. The framework primarily consists of five components:

(1) USD Reserve: As of June 28, 2026, the company held approximately USD 2.55 billion in cash reserves, sufficient to cover around 17.4 months of current preferred dividend and debt interest payments, with a minimum reserve requirement set at no less than 12 months of coverage.

(2) STRC Dividend Policy Adjustment: Starting July 2026, the annualized dividend yield on STRC will be increased to 12%, accompanied by a monthly dynamic adjustment mechanism, intended to attract renewed capital inflows and gradually push STRC’s price back toward USD 100.

(3) Digital Credit Securities Buyback Program: Authorized up to USD 1 billion for repurchasing digital credit securities—including STRC, STRF, STRD, and STRK—to actively stabilize prices when significant discounts emerge in the market.

(4) MSTR Common Stock Repurchase Program: Similarly authorized a USD 1 billion share buyback facility to provide a capital management tool when the company’s stock is materially undervalued.

(5) BTC Monetization Program: For the first time, the company explicitly stated that under necessary circumstances, it may sell a portion of its Bitcoin holdings to replenish U.S. dollar reserves, pay dividends and interest, support securities repurchases, and engage in other capital management activities—moving beyond a rigid 'buy-only' stance.

The core focus of this Framework is to repair creditworthiness, stabilize funding channels, and enhance liquidity management capabilities. The Digital Credit Capital Framework represents Strategy’s signal to the broader capital markets following the STRC discount incident: the company’s objective has evolved from 'continuously issuing securities' to 'actively managing credit and capital structure.' Only by first restoring market confidence in Digital Credit products can the financing flywheel continue to operate.

Strategy’s Bitcoin strategy is fundamentally a capital market-driven financing flywheel: issuing financing instruments to raise U.S. dollar capital → purchasing Bitcoin → increasing Bitcoin holdings and net asset value (Bitcoin NAV) → achieving a higher valuation premium for MSTR (mNAV) → raising more capital and accumulating more Bitcoin, creating a self-reinforcing cycle. The core of this model hinges on whether Strategy can consistently access capital from financial markets at a low cost. Relying solely on cash flow from its software business would allow the company to purchase only a limited amount of Bitcoin; however, by leveraging financing tools such as common stock, convertible bonds, and preferred shares, Strategy has been able to continuously convert capital market funds into Bitcoin reserves. Thus, its ability to raise capital itself constitutes Strategy’s greatest competitive advantage.

This also explains why the market is willing to assign MSTR a valuation premium above its Bitcoin net asset value (NAV). Investors are not buying the Bitcoin currently held by the company but rather its capacity to continuously raise capital and accumulate more Bitcoin. As long as the company can raise funds at a relatively high valuation and use the proceeds to buy additional Bitcoin—and as long as the growth rate of new shares issued remains slower than the growth rate of Bitcoin holdings—the amount of Bitcoin per share (BTC per Share) can continue to rise. What the market truly pays a premium for is the expectation of continuously growing per-share value in the future, not the existing assets themselves.

Of course, this capital flywheel is not without prerequisites. Bitcoin prices need to remain relatively stable. Bitcoin is the most critical asset on Strategy’s balance sheet; if its price continues to decline, the company’s net asset value will come under significant pressure. Additionally, MSTR must maintain a valuation premium relative to its Bitcoin NAV. Here, mNAV can be understood simply as how much premium the market is willing to pay for both Strategy’s Bitcoin holdings and its capital-raising capabilities. When mNAV remains high, issuing new common shares to finance Bitcoin purchases typically enhances per-share value; conversely, if mNAV approaches or falls below 1, further share issuance could dilute existing shareholders. Capital markets must also remain willing to purchase financing instruments such as common stock, convertible bonds, and preferred shares, and the company must retain the ability to consistently service debt interest and preferred dividend obligations.

If these conditions change, the flywheel could reverse direction. When Bitcoin prices persistently fall or remain range-bound for an extended period, the market may worry that Strategy will struggle to raise capital efficiently, leading to a downward revision of MSTR’s valuation premium relative to its Bitcoin NAV (mNAV—understood as the multiple of premium the market is willing to pay for Strategy’s Bitcoin holdings and its ongoing fundraising capability. A higher premium indicates greater market confidence in its ability to keep raising capital and accumulating Bitcoin). As mNAV contracts, the efficiency of ATM (At-the-Market Offering)—continuous equity issuance at market prices—declines. If preferred securities like STRC trade at a discount, newly issued products must offer higher yields to attract investors, further increasing financing costs. Meanwhile, dividend and interest payment obligations keep mounting, potentially forcing the company to raise dividends, repurchase securities, bolster its USD Reserve (U.S. dollar reserves), or even monetize Bitcoin holdings (BTC Monetization) by selling part of its Bitcoin to maintain its capital structure and investor confidence.

This is also why the discount on STRC has drawn significant market attention. It is not just an ordinary price fluctuation but rather a stress test for Strategy’s entire financing flywheel. As the premiums on common shares, preferred share prices, Bitcoin prices, and cash reserves begin to influence each other, the market is increasingly focused on whether this Bitcoin-centered capital system can continue operating stably.

Strategy’s financing framework has broadly evolved through six phases: purchasing Bitcoin with cash, raising capital via convertible bonds, secured and collateralized debt financing, ATM common stock offerings, a preferred equity matrix, and the Digital Credit Framework. The level of disclosure varies across financing instruments. Convertible bonds, secured debt, and preferred shares typically feature clearly stated issuance amounts, coupons, or dividends; ATM common stock, as a continuous offering mechanism, usually has details on shares sold and net proceeds scattered across quarterly reports, annual filings, and supplemental prospectuses. Therefore, this article does not reconstruct every individual ATM transaction but instead highlights key financing phases and representative events.

In its early phase, Strategy used its corporate balance sheet to buy Bitcoin; in the intermediate phase, it used capital market financing to buy Bitcoin; and in the later phase, it began packaging its Bitcoin-backed balance sheet into multiple financing products tailored for different types of investors.

Table 3-1: Timeline of Strategy’s Key Financing Events

Time

Financing Instrument / Event

Key data

Use of Proceeds / Corresponding Action

Strategic Significance

2020-08

Initial Bitcoin purchase using company cash

Approximately 21,454 BTC at a total cost of approximately USD 250 million, averaging around USD 11,652 per BTC

Adopting Bitcoin as a primary reserve asset

Inception of the Bitcoin Treasury Strategy

2020-09

Continued Bitcoin purchases using company cash

Approximately 16,796 BTC at a total cost of approximately USD 175 million

Further increasing Bitcoin reserves

This indicates it is not a one-time arrangement, but a strategic transformation

2020-12

0.75% convertible notes due 2025

Principal amount of approximately USD 650 million

Subsequently purchased approximately 29,646 BTC

Convertible notes became the first-generation core financing instrument

2021-02

0% convertible notes due 2027

Principal amount of approximately USD 1.05 billion

Purchased approximately 19,452 BTC

Strategy began large-scale use of low-coupon financing

2021-06

6.125% senior secured notes due 2028

Principal amount of approximately USD 500 million

Purchased approximately 13,005 BTC

Strategy entered the traditional credit financing market

2022-03

BTC-backed loans

MacroStrategy secured a BTC-backed loan of approximately USD 205 million

Obtained USD funding by pledging BTC as collateral

Attempting to use BTC directly as collateral for financing

2023-2024

ATM common equity financing gaining increased importance

Continuously disclose issuance progress on a quarterly and annual basis

Buying BTC through at-the-market (ATM) common stock offerings

Strategy begins systematically leveraging MSTR's market premium

2024-06

2.25% convertible notes due 2032

Principal amount of USD 800 million, net proceeds of approximately USD 786 million

Purchase of approximately 11,931 BTC

Convertible notes continue to support BTC expansion

2024-10

21/21 Plan

Plans to raise USD 42 billion over three years, comprising USD 21 billion in equity and USD 21 billion in fixed income

Supporting a long-term BTC acquisition program

Upgrading from single financings to a long-term capital plan

Starting in 2025

STRK, STRF, STRD, STRC Preferred Equity Matrix

Multiple classes of perpetual preferred shares with varying dividend yields and risk profiles

Attracting income-oriented, credit-focused, and hybrid capital

Strategy begins productizing its financing instruments

2026-06

Digital Credit Capital Framework

USD Reserve of approximately USD 2.55 billion; USD 1 billion each authorized for Digital Credit buybacks and MSTR repurchases; BTC Monetization can supplement cash reserves

Managing cash, dividends, buybacks, and securities pricing

Strategy enters an active capital structure management phase

Source: CoinW Research

Strategy’s financing model has evolved alongside the expansion of its Bitcoin holdings, broadly progressing through six stages. Initially, Strategy directly used corporate cash to purchase Bitcoin, establishing market recognition of Bitcoin as a treasury asset among public companies and laying the groundwork for subsequent financing. As internal funds gradually became insufficient to meet ongoing Bitcoin acquisition needs, the company began issuing convertible bonds, raising capital in financial markets to expand its Bitcoin position and leveraging anticipated MSTR share price appreciation to secure lower financing costs.

Subsequently, Strategy further entered the credit markets, issuing secured notes and attempting to obtain U.S. dollar liquidity by using BTC as collateral. Its funding sources began expanding from equity capital to debt capital. In 2024, the company launched the 21/21 Plan, combining At-the-Market (ATM) common stock offerings with fixed-income instruments to upgrade its financing approach from single transactions to a long-term capital program, continuously converting capital market funds into BTC reserves. Starting in 2025, Strategy introduced a series of preferred equity products—STRK, STRF, STRD, and STRC—tailored to investors with varying risk appetites, gradually building a multi-layered capital structure.

The critical shift in June 2026 was not that Strategy launched another new instrument, but rather that STRC—originally designed as a relatively stable funding anchor—began trading at a significant discount, forcing the company to respond to market concerns using cash reserves, interest rate adjustments, share buybacks, and BTC monetization. Viewed through the lens of its financing evolution, Strategy’s path can be summarized as: corporate cash → convertible notes → secured debt and BTC-collateralized financing → ATM common stock → a matrix of preferred securities → Digital Credit Framework. This reflects the progressive upgrading of Strategy’s financing system. In its early stage, Strategy addressed 'how to start buying BTC'; in the mid-stage, it tackled 'how to expand BTC holdings using external capital'; in the later stage, it focused on 'how to layer a BTC-backed balance sheet into multiple financing products'; and now, it must solve 'how to maintain the stability of this financing system.'

One of Strategy’s earliest and most frequently used financing methods is issuing common stock, most notably through ATM (At-the-Market Offering). ATM allows the company to continuously and incrementally sell common shares in the secondary market at prevailing market prices, rather than conducting a single large-scale offering. The advantages of ATM include flexibility, no interest payments, no fixed maturity date, and no principal repayment obligation, making it the lowest-cost form of financing. After raising U.S. dollar proceeds, Strategy uses the funds to purchase additional BTC, thereby increasing its BTC holdings and BTC NAV (Bitcoin Net Asset Value). BTC NAV represents the market value of the company’s BTC holdings minus associated liabilities, reflecting the true scale of its BTC reserves.

However, the efficiency of ATM depends on mNAV (Multiple of Net Asset Value), which indicates how many times the market is willing to pay for Strategy’s net asset value. For example, an mNAV of 2 means investors are willing to pay twice the company’s net asset value to buy MSTR shares; if mNAV approaches 1, the stock price nears its asset value, implying limited market premium. When mNAV is high, the company can raise more capital by issuing fewer new shares, enabling it to buy more BTC and potentially increase BTC per share. Conversely, when mNAV approaches 1, issuing additional common stock raises limited capital while requiring more shares to be issued, increasing dilution for existing shareholders. Thus, ATM is inherently a procyclical financing tool highly dependent on market sentiment and valuation levels. During bull markets or when MSTR maintains a high premium, it enables low-cost, continuous expansion of BTC reserves; during bear markets or when mNAV compresses, its financing efficiency declines significantly and may even become unattractive due to equity dilution.

Convertible notes can be understood as 'bonds plus stock options.' Investors initially lend money to the company, which pays interest as agreed and repays principal at maturity; however, if the stock price rises above a predetermined level in the future, investors may choose to convert the bonds into common shares. Strategy has been able to issue large volumes of low-coupon convertible notes because MSTR’s stock exhibits high volatility. Greater stock price volatility implies a higher probability of significant future upside, which increases the value of the embedded conversion option—allowing investors to accept lower coupons. The company isn’t securing low-cost financing solely based on its own creditworthiness but rather by leveraging investor expectations of future stock price appreciation to reduce current financing costs. The advantage of convertible notes is reduced short-term cash flow pressure. However, they are not free capital. If MSTR’s stock price rises, conversion dilutes existing common shareholders; if it doesn’t rise, the notes still mature, requiring the company to repay principal or refinance. Thus, convertible notes don’t eliminate financing costs—they shift them from 'current interest payments' to 'potential future equity dilution or refinancing pressure.' For this reason, they have become one of Strategy’s most important and lowest-cost financing instruments during the early stages of its capital flywheel.

In addition to equity issuance, Strategy also raises capital through bond offerings, including secured notes and unsecured notes. Secured notes require the company to pledge specific assets as collateral; in the event of default, creditors have priority claims on these assets, resulting in lower risk and typically lower financing costs. Unsecured notes lack specific collateral and rely primarily on the company’s overall creditworthiness, exposing investors to higher risk and thus commanding higher yields as compensation. A notable example is Strategy’s 2021 issuance of 6.125% Senior Secured Notes. Here, 6.125% represents the fixed annual coupon; 'Senior' indicates these notes rank ahead of subordinated debt in the capital structure during liquidation; and 'Secured' means the notes are backed by specific company assets, reducing credit risk.

Debt financing does not directly dilute common shares and offers relatively high funding certainty. However, the company must make regular interest payments and repay principal at maturity. When Bitcoin rises, debt financing can amplify gains; when Bitcoin falls, neither the principal nor interest automatically decreases, thereby magnifying balance sheet pressure. A Bitcoin-backed loan operates on a logic similar to secured debt, except that the collateral shifts from corporate assets to Bitcoin. In simple terms, it involves pledging held Bitcoin to a financial institution in exchange for U.S. dollar liquidity without directly selling the Bitcoin. This approach allows continued Bitcoin ownership while obtaining cash, but because Bitcoin prices are highly volatile, a sharp decline in its price may trigger a margin call—requiring additional collateral—or even prompt the lender to demand early partial repayment. Consequently, compared with financing backed by typical corporate assets, Bitcoin-collateralized financing is significantly more sensitive to market volatility and carries higher risk.

STRK refers to Strike Preferred Stock, a convertible perpetual preferred share issued by Strategy. Preferred stock sits between common equity and debt: it typically carries a fixed dividend and takes precedence over common shares in dividend distributions and liquidation proceeds. 'Perpetual' means it has no fixed maturity date, unlike conventional bonds that require principal repayment on a specific date. STRK also includes a conversion feature, allowing investors to exchange STRK into MSTR common shares upon meeting specified conditions. According to Strategy’s official documentation, each STRK share is convertible into 0.1 MSTR common share and offers an 8% annual dividend, paid quarterly. Consequently, STRK is not a pure fixed-income product but a hybrid instrument combining 'dividend yield plus equity upside.' Investors purchase STRK to receive preferred dividends while retaining exposure to potential MSTR share price appreciation. For Strategy, STRK broadens its investor base: it avoids immediate dilution like common equity issuance and sidesteps the explicit principal repayment pressure of traditional debt. The risk lies in the fact that if MSTR’s stock underperforms, the conversion value declines, making STRK’s appeal increasingly dependent on its dividend yield alone; if markets question Strategy’s ability to make cash payments, STRK’s market price will be repriced downward.

STRF is Strife Preferred Stock, officially categorized as Long Duration Senior Credit. 'Long Duration' implies greater sensitivity to changes in interest rates, credit spreads, and shifts in market risk appetite. 'Senior Credit' indicates a relatively senior position within the capital structure, emphasizing higher claim priority. The term 'Credit' underscores that investors buying STRF are primarily expressing confidence in Strategy’s ability to consistently pay dividends and maintain creditworthiness. Per Strategy’s official materials, STRF is the senior-most perpetual preferred stock, offering a 10% annual cash dividend paid quarterly, and includes a missed dividend step-up penalty mechanism. This mechanism means that if the company fails to pay a scheduled dividend, the future dividend rate or compensation owed may increase—imposing stronger discipline on the issuer and providing greater protection for investors. STRF functions more like an instrument tailored for fixed-income investors. It is not marketed on the basis of MSTR’s high-volatility upside potential, but rather on its seniority, cash dividend, and protective features. It enables Strategy to attract credit-focused capital and reduce reliance on windows in the common equity and convertible bond markets. However, a clear challenge remains: Bitcoin itself generates no cash flow, yet STRF requires the company to sustain ongoing cash dividend payments.

STRD is Stride Preferred Stock, officially positioned as Long Duration High Yield Credit. 'High Yield Credit' typically refers to instruments offering yields above those of standard investment-grade bonds or senior credit products. The higher yield does not reflect lower risk, but rather reflects investors’ demand for greater compensation for taking on more risk. STRD is not primarily focused on equity upside nor on top-tier structural protection; instead, it targets investors willing to accept elevated risk in exchange for higher returns. If STRF resembles a relatively conservative senior credit instrument, STRD functions more like an aggressive high-yield credit product. For Strategy, STRD completes the high-yield layer of its financing framework, appealing to capital that seeks more than standard fixed income but prefers not to directly purchase MSTR common stock. However, high-yield credit instruments are more prone to trading at discounts during stressed market conditions. If STRD trades significantly below its issue price or stated amount, the market is effectively signaling through price that investors now demand higher yield compensation, reflecting a repricing of Strategy’s credit risk.

STRC (Stretch Preferred Stock) is currently the most worthy of focused analysis, as it best embodies Strategy’s Digital Credit ambitions. Officially, STRC is positioned as Short Duration High Yield Credit. This involves three key concepts:

(1) 'Short Duration' means low duration. The shorter the duration, the less sensitive the instrument’s price is to interest rate changes, and the faster investors receive cash flows—making it resemble a cash management or short-term income tool. Although STRC is legally structured as a perpetual preferred stock, it aims to deliver investors a shorter-duration, higher-liquidity experience through biweekly dividend payments, adjustable dividends, and a target trading price around $100.

(2) High Yield Credit refers to 'high-yield credit.' It indicates that STRC’s appeal primarily stems from its relatively high dividend yield, rather than the high price appreciation potential typical of common equity. Investors purchasing STRC are essentially buying Strategy’s creditworthiness and cash payment capacity, while receiving a higher yield as compensation.

(3) Stated amount can be understood as the preferred stock’s 'par value' or 'contractual reference amount.' The stated amount for STRC is USD 100. Strategy aims for STRC to trade around this USD 100 level, so investors perceive it as a relatively stable income-generating credit instrument rather than an equity-like security subject to significant price volatility.

According to Strategy’s official information, STRC is a variable-rate perpetual preferred stock. Its current annualized dividend yield is 12%, paid in cash semi-monthly, with the dividend rate adjusted monthly. 'Variable-rate' means the dividend rate is not permanently fixed but can be adjusted based on market conditions. Factors influencing adjustments may include STRC’s market price, credit spreads, Bitcoin price and volatility, USD Reserve coverage levels, and market demand for Strategy’s credit. The objective of this mechanism is to keep STRC’s trading price as close as possible to its USD 100 stated amount. If STRC’s price declines significantly, Strategy can enhance its attractiveness by raising the dividend rate or reduce market supply and future dividend obligations through repurchases. Thus, STRC’s innovation lies not merely in its '12% dividend,' but in Strategy’s attempt to create a short-duration, high-yield, relatively stable, and actively managed digital credit product.

However, STRC’s risks must also be clearly acknowledged. Strategy explicitly states that STRC offers no guarantees regarding returns, liquidity, or future performance, and cash dividends are not assured. In other words, trading near USD 100 reflects the company’s target and management intent—not a binding promise to investors. Should Bitcoin prices fall, MSTR’s credit come under pressure, USD Reserve coverage deteriorate, or market participants demand higher yields, STRC could still trade below USD 100. In such scenarios, the company might need to raise dividends, conduct repurchases, bolster cash reserves, or even utilize BTC Monetization to maintain market confidence.

STRC serves as the 'credit anchor' within the Digital Credit Framework. If STRC can consistently trade near $100, the company can continue issuing new STRC at relatively low cost; conversely, if STRC trades at a persistent discount, it signals that the market is repricing Strategy’s credit risk, significantly impairing its preferred equity fundraising capacity. Therefore, STRC has become a critical indicator for assessing whether the entire financing flywheel remains sustainable.

BTC Monetization is the most controversial component of the Digital Credit Framework. Monetization here refers to asset monetization—converting held Bitcoin into U.S. dollar cash. It is not a traditional financing instrument, as the company does not issue new securities; instead, it transforms Bitcoin on the asset side of its balance sheet into cash. However, from a capital structure management perspective, it functions as a financing tool because it alleviates cash payment pressures.

Under Strategy’s Digital Credit Capital Framework, BTC monetization proceeds may be used to replenish USD reserves, pay or supplement preferred stock dividends and debt interest, and support repurchases of Digital Credit Securities or MSTR common stock. This marks Strategy’s transition from a 'Bitcoin-only-buy' approach to actively managing its Bitcoin exposure. Initially, Strategy’s narrative was straightforward: continuously accumulate Bitcoin and avoid selling. This resonated strongly in bull markets. However, as the company issued increasing amounts of debt and preferred equity, dollar-denominated obligations—such as interest, dividends, and repurchases—emerged. If these cannot be met solely through new financing or software business cash flows, Bitcoin becomes the ultimate source of liquidity.

On the positive side, BTC monetization acts as a safety valve—it enables Strategy to bolster cash reserves, maintain dividend payments, support buybacks, and help stabilize credit instruments like STRC. On the negative side, it weakens the original 'buy-and-never-sell Bitcoin' narrative. If BTC monetization is used only occasionally, the market may accept it as a prudent capital management tool; however, if it becomes a recurring source of cash, investors will reassess whether Strategy is truly accumulating Bitcoin or merely using Bitcoin to sustain an increasingly complex financing structure.

If looking only at the surface, all of Strategy’s financing tools serve the same objective: obtaining U.S. dollar funding, increasing Bitcoin holdings, or maintaining the existing capital structure. However, the costs, risks, and optimal conditions for each tool differ significantly. Under current pressures, the core issue is not which tool is theoretically best, but whether Strategy can re-establish a virtuous cycle among STRC, MSTR, and Bitcoin.

Table 4-1: Comparison of Strategy’s Financing Tools

Financing Tool

Core Functions

Primary Cost

Dilutive to Common Shares?

Cash Payment Pressure

Most Suitable Environment

Performance Under Current Stress

Biggest Risk

Corporate Cash

Initial Bitcoin purchases to establish the Treasury narrative

Opportunity cost: the cash could have been used for other purposes

Low

The company has ample cash and is in the early stages of strategic transformation

Can serve as a cash cushion, but its scale is limited

Cannot support aggressive, long-term buying

ATM common shares

Convert MSTR's premium into Bitcoin

Equity dilution

Yes

No fixed interest or dividends

Bitcoin bull market, MSTR trading at high mNAV

Issuance efficiency declines when mNAV compresses

Low-premium equity issuance harms shareholders

convertible bonds

Raise capital with low coupon debt while offering investors conversion into equity

Future conversion into equity or repayment at maturity

Possible

Lower

MSTR exhibits high volatility and strong equity market performance

Future maturity and refinancing pressures are drawing renewed attention

Potential dilution and refinancing risk

Secured debt / Unsecured debt

Obtain committed debt financing

Fixed interest and principal repayment obligations

high

Credit markets open

The market is more focused on solvency and asset-side volatility

Leverage pressure rises when Bitcoin falls

BTC-backed loans

Use Bitcoin as collateral to obtain US dollar liquidity

Interest and collateral utilization

Medium-high

Stable Bitcoin prices and active collateralized financing

Bitcoin volatility amplifies collateral risk

Price declines trigger collateral pressure

STRK

Dividend + MSTR upside participation

8% dividend and potential conversion-related dilution

Possible

Moderate

Investors are bullish on MSTR/BTC upside

Conversion value declines when MSTR falls

Appeal shifts to reliance on dividends

STRF

Senior-like credit long-duration income instrument

10% cash dividend

Generally no

high

Strong demand from income-focused funds

Cash payment capacity has become central

Dividend obligations are becoming a long-term burden

STRD

High-yield credit tier

A 10% dividend means discounts will raise the effective cost

Generally no

high

Strong risk appetite for high-yield assets

Prices come under pressure when credit spreads widen

Prone to trading at a discount in stressed markets

STRC

Short-duration, high-yield credit instruments

Variable dividend, currently at 12%

Generally no

High

The market demands high yields and relatively stable prices

Falling below USD 100 weakens financing functionality and increases pressure from rate adjustments and buybacks

Failure to stabilize would undermine the Digital Credit narrative

BTC Monetization

Convert BTC into cash

Give up part of the BTC upside exposure

Alleviate cash flow pressure

When equity financing is unattractive and cash reserves are insufficient

Shifts from a contingency tool to a potential source of cash attracting market attention

Challenging the 'buy-only, never-sell' narrative

If we view the entire capital system as a financing platform, Strategy does not rely on any single financing instrument. Instead, it assigns distinct roles to different instruments. ATM-issued common shares serve as the primary engine of the capital flywheel’s expansion by converting market premiums into Bitcoin holdings during periods when MSTR is highly valued. Convertible bonds and straight debt leverage equity volatility and credit markets to secure long-term funding at lower costs. STRK, STRF, and STRD further cater to investors with varying risk appetites, broadening funding sources and establishing a multi-tiered credit product framework. STRC acts as both a cash management tool and a credit anchor—its price stability directly affects Strategy’s ability to sustainably raise capital through the preferred equity market. Bitcoin monetization serves as the ultimate safety valve for the entire system, providing dollar liquidity to the company when market conditions deteriorate and other financing channels become less efficient. These financing instruments are not inherently superior or inferior to one another; rather, they each fulfill distinct functions—growth, funding, credit support, and liquidity management—and dynamically shift roles in response to changing market conditions to jointly sustain the capital flywheel.

The market’s intense focus on STRC’s discount is not simply due to a decline in the price of a single preferred share, but because STRC occupies a pivotal position within Strategy’s overall capital structure. Unlike common shares, which largely reflect market sentiment, STRC more directly signals the market’s assessment of Strategy’s creditworthiness and fundraising capacity, making it a critical indicator of whether the capital flywheel can continue operating.

From a balance sheet perspective, Strategy has gradually built a multi-layered capital structure backed by Bitcoin. On the asset side, holdings consist primarily of Bitcoin and USD Reserve. Bitcoin determines the company’s long-term asset value and shapes its market narrative, while the USD Reserve ensures sufficient cash to service debt interest and preferred dividends. As of June 28, 2026, the company disclosed a USD Reserve of approximately $25.5 billion, sufficient to cover about 17.4 months of current annualized preferred dividends and debt interest payments. This indicates that the market is now paying attention not only to how much Bitcoin Strategy holds, but also to whether its credit system can sustain ongoing payment obligations.

On the funding side, a tiered risk-return structure has emerged: debt provides certainty of capital but entails fixed interest payments and maturity obligations; preferred shares such as STRK, STRF, STRD, and STRC primarily attract income- and credit-focused capital, bridging equity and debt financing; and common shares (MSTR) bear the highest volatility while retaining the greatest upside potential. Through this layered design, Strategy no longer merely sells a single stock to the market but offers a diversified suite of investment products—built around the same underlying Bitcoin assets—to investors with varying risk preferences.

Precisely for this reason, changes in STRC’s price propagate throughout the capital structure. When STRC trades below its target range for an extended period, it signals that the market demands higher compensation for credit risk, thereby increasing the cost of future preferred equity issuances. As preferred equity fundraising efficiency declines, the company may become increasingly reliant on ATM common share offerings, USD Reserve drawdowns, or Bitcoin monetization to meet cash needs. If the market further worries that Bitcoin accumulation could slow—or even require Bitcoin sales to replenish liquidity—MSTR’s valuation premium (mNAV) could come under pressure, reducing the efficiency of common equity fundraising as well.

STRC’s discount is not an isolated incident but rather the initial trigger in the capital flywheel’s risk transmission chain. What it truly reflects is not whether a single preferred share can return to around $100, but whether the market still believes Strategy can continue raising capital at low cost and keep the entire capital flywheel functioning smoothly.

The introduction of the Digital Credit Framework indicates that Strategy now recognizes: as its suite of financing instruments expands, the company requires not just fundraising capacity but also sophisticated capital structure management. Particularly after STRC deviated from its target trading range, the market no longer accepts vague assurances like 'we’ll keep buying Bitcoin'—instead, it demands evidence that the company can uphold its credit system using cash, dividends, buybacks, and its Bitcoin asset base. The USD Reserve addresses short-term payment credibility by transforming the abstract question 'Will the company have enough cash to pay interest and dividends?' into an observable metric. This is crucial for Strategy because, although Bitcoin is its core asset, Bitcoin itself generates no cash flow. As long as debt and preferred equity balances grow, the market will insist that the company demonstrate reliable sources of U.S. dollar liquidity. The STRC dividend increase tackles the yield compensation issue: by raising STRC’s annualized dividend yield to 12%, the company is essentially offering higher returns to incentivize investors and guide STRC back toward $100. However, this comes at a cost: higher dividend yields increase the company’s future cash payment obligations.

Digital Credit Securities buybacks address discount and confidence issues. If STRC, STRF, STRD, and STRK are trading at significant discounts, the company can repurchase them—reducing future dividend obligations while signaling to the market that it is willing to defend the value of its own securities. However, buybacks require cash, which must come from USD reserves, financing, or Bitcoin monetization—none of which are cost-free. MSTR's common stock repurchases reflect capital discipline. Historically, the market has been most familiar with Strategy issuing common shares at high valuations to purchase Bitcoin; now, with the company authorizing common stock repurchases, it aims to convey that when issuing additional shares is no longer appropriate—or when the company believes its stock is undervalued—buybacks may be a more rational course of action than continued issuance. Bitcoin monetization is the most critical—and most controversial—tool. It indicates the company is willing to sell Bitcoin when necessary to maintain cash reserves, fund dividend and interest payments, and support securities repurchases. While this bolsters credit investors’ confidence, it also weakens the original narrative of 'continuously accumulating Bitcoin without selling.'

The Digital Credit Framework can alleviate market concerns but cannot fully resolve the underlying tensions. As long as Bitcoin does not generate cash flow while Strategy’s financing instruments continue to accrue dividend and interest obligations, the market will remain focused on whether the USD Reserve is sufficient, whether BTC Monetization becomes routine, and whether STRC can truly stabilize.

Can STRC return to around $100?

Higher dividends, repurchases, a stronger USD Reserve, insider buying, along with a Bitcoin price rebound and improved market risk appetite, could all help push STRC back toward the trading range the company aims to maintain. However, if the market continues to demand higher risk compensation, simply raising the dividend yield to 12% may still be insufficient to support the price. If STRC fails to stabilize over the long term, its role as the core financing instrument within Digital Credit will weaken, and Strategy’s future cost of raising capital through STRC will rise significantly.

Can MSTR’s mNAV recover?

A Bitcoin price rebound, reduced inefficient share issuance, timely common stock repurchases, and an increase in Bitcoin per share could all help restore market confidence. If investors regain belief that Strategy can consistently raise capital at higher valuations while continually increasing Bitcoin holdings per share, mNAV could gradually recover. Conversely, if the logic of the capital flywheel is no longer accepted, mNAV may remain depressed for an extended period, and the efficiency of ATM common stock financing would also decline.

Are dividend and interest cash obligations manageable?

Strategy’s core solution to this is establishing a USD Reserve. According to company disclosures, as of June 30, 2026, the USD Reserve is sufficient to cover approximately 17.4 months of current annualized preferred dividend and debt interest payments; including authorized BTC Monetization capacity, this coverage extends to roughly 25.9 months. However, this cushion will be gradually eroded by higher dividends, expanded preferred stock issuance, ongoing repurchase programs, and market volatility. If cash reserves continue to decline, valuation pressure on preferred shares could intensify further.

Will BTC Monetization undermine Strategy’s core narrative?

According to the company’s plan, proceeds from Bitcoin sales will primarily be used to replenish USD reserves, fund or supplement dividends and interest payments, and support capital management activities such as securities repurchases. If Bitcoin sales are used only occasionally as a liquidity management tool, the market generally accepts this practice. However, if selling Bitcoin gradually becomes a recurring source of cash flow, investors may reassess Strategy’s business model, perceiving a shift from 'continuously accumulating Bitcoin' toward 'relying on Bitcoin to sustain its financing framework,' potentially undermining the long-term investment thesis centered on leveraged Bitcoin holdings.

Does having more financing tools mean increasingly complex risks?

Strategy’s approach is to institutionalize the management of cash, dividends, buybacks, and issuance discipline through its Digital Credit Framework. However, institutionalized management cannot eliminate Bitcoin price volatility or guarantee market confidence. While more financing tools offer greater flexibility, they also create more complex risk transmission channels. Should STRC trade at a discount, MSTR decline, and Bitcoin weaken simultaneously, these tools could amplify each other’s pressures.

Strategy does have solutions—but all come at a cost. Raising STRC dividends would increase cash outflows; buybacks require cash; Bitcoin monetization entails sacrificing part of the Bitcoin exposure; and reducing common equity issuance would slow Bitcoin accumulation. What the market truly cares about is not whether the company has tools, but whether those tools can restore confidence at a sufficiently low cost.

Strategy’s innovation lies in building a financing ecosystem around Bitcoin. However, STRC’s discount indicates that this structure is now undergoing a stress test. Market disagreement centers precisely here. Supporters argue that Strategy’s financing capability itself is its core advantage. As long as the company can issue common stock when MSTR trades at a high premium, issue convertible bonds during periods of elevated volatility, and issue preferred shares when income-seeking capital is active, it can continuously convert capital market funding into Bitcoin holdings. From this perspective, Strategy isn’t merely adding leverage—it’s using capital markets instruments to boost Bitcoin per share and amplify its long-term Bitcoin exposure. Critics, however, contend that this model heavily relies on sustained market trust. Should Bitcoin prices fall, MSTR’s mark-to-market net asset value (mNAV) compress, STRC trade at a persistent discount, or refinancing pressure on convertible debt rise, the financing flywheel could reverse direction. Notably, preferred dividends and debt interest must be paid in U.S. dollars, yet Bitcoin itself generates no cash flow—increasing the company’s reliance on USD reserves, continued fundraising, or Bitcoin monetization.

Whether STRC stabilizes depends on whether the market believes the combination of a 12% dividend yield, USD reserves, buybacks, and Bitcoin monetization is sufficient. If STRC rebounds to around $99–100, the Digital Credit narrative would be restored, allowing Strategy to continue raising capital via preferred shares. However, if STRC remains below its target range for an extended period, the company’s ability to issue additional STRC would diminish, forcing greater reliance on common equity, cash reserves, or Bitcoin monetization. MSTR’s stability, meanwhile, hinges on Bitcoin price, mNAV, growth in Bitcoin per share, and disciplined common equity issuance. If Bitcoin rebounds, MSTR’s premium recovers, and the company avoids inefficient share issuance at low mNAV levels, the common equity financing flywheel could restart. But if Bitcoin weakens concurrently, MSTR and STRC could drag each other down: falling MSTR prices erode financing capacity, while STRC discounts raise funding costs—ultimately slowing Bitcoin acquisition.

Ultimately, Strategy’s core risk has shifted from 'whether it holds enough Bitcoin' to 'whether it can maintain a capital structure supported by Bitcoin yet requiring stable U.S. dollar cash flows to operate.' STRC’s de-anchoring isn’t mere noise—it’s the first major stress test of this structure. What’s truly being tested is whether Strategy can re-establish a virtuous cycle among Bitcoin, MSTR, and STRC.

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