STRC unanchored by 11%, can the perpetual motion machine of Strategy still operate?

*Author: Azuma, *Odaily Planet Daily**

Strategy's preferred stock STRC is currently in a continuous "de-anchoring" state.

The US stock market shows that since May 15, STRC has gradually deviated from the target par value of $100, and recently the discount has significantly intensified, reaching a low of $83.26 during trading yesterday, closing at $88.59, which is over 11% "de-anchored" from the target par value.

For a common stock, an 11% drop might not be a big deal, but for STRC, the continuous deviation from the target par value of $100 means that the core design goal of this product is facing severe challenges.

In the initial design of Strategy, STRC was intended to be a yield-bearing security operating around the $100 par value, rather than a high-volatility speculative asset. Now, as the market price diverges further from the target par value, more and more investors are beginning to reassess the logic behind this product.

More importantly, as Strategy continues to expand its Bitcoin reserves, STRC has gradually become the company's most important financing channel. In a sense, the market's pricing of STRC reflects not only investors' attitudes towards a preferred stock but also the market's confidence in Strategy's entire capital operation model.

STRC: The Engine of Strategy's Capital Flywheel

To understand the seriousness of this de-anchoring, it is first necessary to clarify the product structure of STRC and its unique anchoring mechanism.

STRC is an innovative financial derivative launched by Strategy in 2025. Unlike Strategy's common stock MSTR, STRC is positioned as a perpetual preferred stock with a fixed target par value ($100) and relatively stable dividend yield, making it more akin to a fixed-income security.

• Odaily Note: Strategy founder Michael Saylor recently revealed that STRC was designed with the assistance of AI.

In the closed loop of Strategy's balance sheet expansion, STRC is not just an ordinary financing tool but the strongest engine of the current Strategy capital flywheel.

Before the launch of STRC, Strategy primarily relied on issuing convertible bonds and directly increasing the issuance of common stock to raise funds for purchasing Bitcoin. However, both models have limitations—convertible bonds are subject to maturity dates and debt leverage limits, while frequent issuance of common stock dilutes the rights of existing shareholders.

The emergence of STRC perfectly addresses this pain point, with its core utility in Strategy's strategy reflected in two dimensions:

• Unlimited "At-the-Market" (ATM) issuance plan: As long as STRC's market price remains stable at $100 or above, Strategy can continuously issue new STRC shares through the ATM mechanism in the secondary market and raise fiat currency.
• Zero dilution of purchasing power: As a perpetual preferred stock, STRC has no statutory maturity repayment pressure and lacks voting rights and residual asset distribution rights of common stock. This means that Strategy can create billions in fiat purchasing power without diluting MSTR shareholders' rights or increasing rigid debt interest, and invest all of it into increasing Bitcoin holdings.

Through the closed loop of "Issuing STRC ➡️ Raising fiat currency ➡️ Purchasing BTC ➡️ Enhancing company net assets ➡️ Boosting STRC trust," Strategy has successfully built what seems to be an infinitely cyclical capital flywheel.

However, the key premise for this flywheel to operate smoothly is that STRC must maintain a price near the par value of $100. Once the market price falls significantly below $100, according to the ATM fundraising terms and market arbitrage logic, Strategy will no longer be able to effectively absorb funds from the market through discounted preferred stock, and its entire capital magic will factually come to a standstill.

At the design stage, to ensure that STRC's secondary market price can always align with the target par value of $100, Strategy introduced a mechanism of "monthly dynamic adjustment of dividend rates." Simply put, when STRC's market price is below $100, Strategy can raise the dividend rate to enhance the product's attractiveness; when the price is above $100, it can lower the dividend rate—theoretically, by continuously adjusting the dividend rate, STRC should be able to operate around $100 in the long term.

But now, even though Strategy has raised the dividend to a high of 11.5% and changed the payment frequency from monthly to bi-monthly, STRC's "de-anchoring" status has not been effectively repaired… Why is that?

Reasons for De-anchoring: Confidence, Confidence, and More Confidence

The failure of the dividend adjustment effect means that the risks being priced by the market have exceeded the STRC yield itself. From the current market discussions, the market's risk concerns mainly manifest in two aspects.

First are the superficial technical factors. Some market participants believe that the recent decline largely stems from concentrated selling during the deleveraging of arbitrage funds.

Over the past year, STRC has traded around $100, attracting a large amount of yield-seeking arbitrage capital. This type of capital often amplifies returns through leverage, earning dividend income while profiting from the price returning to par value. However, as STRC fell below $100 and continued to weaken, some leveraged accounts began to trigger risk control lines, forced to sell their positions; the price decline further triggered more leveraged funds to close positions, ultimately creating a chain reaction. In this process, the selling pressure continuously reinforced itself, causing STRC's decline to far exceed normal supply and demand changes.

But if the current market performance can only be explained by leveraged selling, it still seems insufficient. For many investors, deeper concerns lie in Strategy's liquidity reserve situation.

Earlier this month, JPMorgan released a research report stating that Strategy has an annual dividend payment obligation of about $1.7 billion, and at the current cash reserve level, the cash on hand is only enough to cover about 6.3 months of preferred stock dividend payments. This has raised market concerns about Strategy's promised future liquidity coverage capability.

In response, Strategy provided a completely different explanation, with the company officially stating on X that if its large Bitcoin reserves are taken into account, they are sufficient to cover 32 years of dividend payments.

However, the issue is that these two statements are actually based on different premises. JPMorgan focuses on Strategy's cash position, while Strategy's calculation implicitly includes an important assumption—if necessary, the company can raise funds by selling Bitcoin.

This touches on the most sensitive part of the market. Earlier this month, Strategy sold its Bitcoin holdings for the first time; although the sale was only for 32 coins, the official narrative framed it as "actively conducting market desensitization testing" and mentioned "more will be bought back in the future," this move still caused a severe shock to the market. The reason is that for the past few years, Strategy and its founder Michael Saylor have been conveying a core narrative to the market—Bitcoin is a long-term strategic reserve asset, and the company will raise operational funds through capital markets rather than relying on selling Bitcoin.

Therefore, when the market first saw Strategy actually selling Bitcoin, it inevitably raised greater concerns—if the financing environment tightens in the future, will Strategy need to further rely on selling Bitcoin to meet dividend obligations? If the answer is not an absolute no, then investors must reassess the risk level of the related securities.

From this perspective, the continuous "de-anchoring" of STRC is actually the market reassessing the robustness of the entire Strategy capital structure.

Strategy's Buying Power May Turn into Selling Power

For Strategy, the biggest impact of STRC's continuous de-anchoring is the weakening of its financing function.

In recent years, Strategy has been able to continuously expand its Bitcoin reserves, with the core logic being to raise funds from the capital market through issuing stocks, convertible bonds, and preferred stocks, and then use the funds to increase Bitcoin holdings. STRC is Strategy's most important financing tool, and when it trades long-term below the target par value of $100, it means the market is demanding higher risk compensation, and Strategy's financing ability will thus be temporarily stalled.

Going forward, the re-anchoring status of STRC may become an important indicator for the market to observe Strategy's risk situation. If STRC remains in a discounted state for an extended period, leading to a continuous limitation of financing ability, while Strategy's cash reserves are continually consumed, then market concerns about Strategy potentially needing to sell more Bitcoin to meet dividend payment demands will inevitably intensify.

Once this expectation strengthens, its impact will no longer be limited to STRC itself. As one of the most important marginal buyers in the Bitcoin market over the past few years, Strategy's financing ability and accumulation pace have always profoundly influenced market supply and demand expectations. If Strategy's buying power turns into selling power, it could create unimaginable downward pressure on Bitcoin.