Written by: Forbes

Translated by: AididiaoJP, Foresight News

Bitcoin remains sluggish, and Strategy, led by Michael Saylor, is doing everything possible to maintain investor confidence, but a chain reaction suddenly threatens two digital dollar products with a combined scale of nearly $500 million.

Recently, no company has made crypto investors more anxious than Strategy. As the publicly traded company holding the most Bitcoin in the world, it has roughly $58.5 billion worth of Bitcoin on its balance sheet.

In June, Bitcoin fell below $60,000, hitting a new low since October 2024. The closing price of Strategy's common stock plummeted from a historical high of $473.80 to a low of $82, with a current market capitalization of approximately $28.5 billion. The company's popular preferred stock Stretch (code STRC) also fell to $74, discounting $26 from its $100 par value. This preferred stock is now distributing an annualized dividend of 12%, which is considered junk bond level. Coupled with $6.7 billion in convertible bond interest, Strategy needs to pay a total of about $1.76 billion annually in preferred stock dividends and interest.

Under pressure, Strategy was forced to abandon Saylor's long-held stance of "never selling Bitcoin." The company has authorized the sale of up to $1.25 billion in Bitcoin to replenish cash reserves and cover the aforementioned payments. From the end of May to early July, Strategy sold approximately $218.5 million in Bitcoin and raised nearly $1.85 billion by issuing additional common shares. Currently, cash reserves amount to $3.75 billion, enough to cover 2.1 years of current dividends. Saylor's net worth has also shrunk from over $9 billion at the beginning of 2025 to about $3.3 billion recently.

However, Strategy's troubles do not end with the various financial instruments offered to the public. Before the collapse, Stretch had become quite popular among many decentralized finance (DeFi) projects, which tried to turn this generous dividend into on-chain yield products.

The two largest by scale are Apyx and Saturn, managing nearly $490 million in assets combined: Apyx has gross reserves of $307 million, while Saturn has a total locked value of $183 million. According to data from crypto analytics firm Artemis, analyst Zheng Jie Lim estimated that as of July 21, approximately $267 million is directly exposed to Stretch—of which Apyx holds about $196 million and Saturn around $72 million. The rest consists mostly of cash, tokenized treasury bonds, and the protocols' own assets.

Apyx holds Stretch and cash in brokerage and custody accounts and uses this as reserves to issue synthetic dollars called apxUSD. Unlike traditional stablecoins like Tether USDT and Circle USDC, which are backed by cash and treasury bonds and pegged to $1, apxUSD does not guarantee it will always be worth $1; its redemption value will fluctuate with the underlying asset mix. Yield-seeking investors can deposit apxUSD into Apyx in exchange for another token, apyUSD, thus sharing in Stretch's semi-monthly dividend income.

During the sell-off at the end of June, apxUSD once fell below $0.80. By July 21, its secondary market price on exchanges like Kraken and Curve had rebounded to around $0.90. Excluding minted but unsold tokens and Apyx's own liquidity, Artemis estimates Apyx has about $233 million in reserves, corresponding to a circulating token value of approximately $257 million, covering only 90.7%. In other words, investors who thought they bought "quasi-dollars" are sitting on an unrealized loss of about 10%. Stretch accounts for 84% of Apyx's reserves. Furthermore, eligible investors wishing to redeem apyUSD through Apyx must wait about 20 days.

According to Token Terminal data, Apyx's operating entity is registered in the British Virgin Islands. Its main supporter is DeFi Development Corporation—the first publicly traded crypto treasury company focused on accumulating Solana (Solana's price has nearly halved since early 2026). Like many digital asset treasury companies, the stock price of this company has plummeted from $42.50 in May last year to around $2.70 recently.

Saturn's approach is slightly different. Its stablecoin USDat is backed by tokenized treasury bonds; investors seeking higher returns can exchange it for an interest-bearing version called sUSDat, which is largely supported by Saylor's Stretch preferred stock. As of July 21, Stretch accounted for about 94% of sUSDat's reserves, with each sUSDat worth approximately $0.90 USDat.

The protocol is promoting an annualized yield of up to 27.5%, but only 12 percentage points of that come from Stretch dividends. The remaining portion hopes for Stretch to rebound from its current price of around $87 back to its $100 par value—a classic optimistic assumption in crypto.

According to PitchBook, Saturn is headquartered in Philadelphia, incubated by YZi Labs, and has received investments from Spartan Group, Anchorage Digital, and others.

Apyx and Saturn both restrict access based on jurisdiction and prohibit U.S. users from participating. Eligible investors can purchase products through the company's official website and trade related tokens in crypto markets such as Curve and Pendle.

Sid Powell, co-founder and CEO of the crypto lending platform Maple Finance, stated that buyers (mostly retail investors and mature yield funds) still have reasons to hold and wait. Early investors may prefer to continue collecting Strategy dividends rather than selling at a loss; new buyers are betting on Strategy's cash reserves increasing, hoping to push Stretch back to $100. If interest rates continue to decline, the attractiveness of this bet will further increase: a 12% dividend (if it can really be sustained) seems more appealing when other yields decrease.

These protocols showcase how DeFi can derive multiple speculative opportunities from a single bet (Stretch preferred stock). On the Morpho lending platform, investors can collateralize Apyx and Saturn tokens to borrow other digital dollars, then buy more interest-bearing tokens, continuing the cycle. This is known as "looping"—a crypto version of "borrow to leverage." It exponentially amplifies risk: once confidence in the underlying securities wanes, it can trigger catastrophic collapses. Right now, Stretch and Strategy are deeply entrenched in difficulties.

On the Pendle platform, these tokens can also be split into separate claims for principal and future income. "This is just like breaking a bond into principal and coupon payments," explained Glenn Cameron, global head of Dallas Bitcoin custodial and consulting firm Onramp Institutional. Certain positions can be further reinvested in the lending market, allowing traders to borrow more dollars and buy more tokens, continuing the loop.

Some paths even advertise annual yields as high as 40%, and Saturn's official website also rewards participants with loyalty points. If these "astonishing" yields and looping leverage techniques sound like boiler room salesperson pitches, you would do well to proceed with caution. These investments are offshore and currently lack oversight from U.S. regulators.

Leverage acts efficiently and brutally in reverse. When Stretch declines, reserves devalue, token prices follow the downward trend, and collateral on loans becomes insufficient. If the borrower's collateral value falls below the threshold required by Morpho, external liquidators (usually automated bots) can pay off the debt and seize the collateral at a discount. If they then dump it into a market already filled with anxious sellers, prices will further drop, triggering a new round of liquidations. "Because they leveraged, Stretch doesn't need to drop much to trigger a chain liquidation," Cameron said.

This mechanism is already in operation, but losses are currently manageable. Artemis reported that from early June to July 16, there were a total of 116 liquidations involving Apyx and Saturn collateral, amounting to about $7.2 million in loans. Almost all debts have been recovered. However, if tokens fall another 10%, according to Artemis' estimates (assuming borrowers neither repay nor add collateral), up to $5.7 million of Apyx-related debts could enter liquidation territory.

Powell believes that as long as Stretch continues to trade below $100, these protocols remain fragile. He pointed out that the drop in preferred stock at the end of June once decoupled Apyx's synthetic dollars. Neither Apyx nor Saturn responded to Forbes' request for comments. Powell revealed that Maple has refused about half a dozen borrowing requests collateralized by Stretch or its tokenized versions, precisely due to volatility.

However, he does not believe Apyx or Saturn will trigger a broader crypto crisis. Neither has imposed new legal obligations on Strategy, and the use of Stretch in DeFi is not extensive enough to cause significant contagion. "Currently, its integration with DeFi is not that high," he said.

Greater risks are more likely to be transmitted through Stretch itself. If investors concentrate on redeeming tokens, Apyx and Saturn may be forced to sell reserves, further depressing preferred stock prices. Strategy may face pressure to either raise dividends again or buy back shares to boost demand. "This will drive up Strategy's capital costs," Powell stated.

Strive CEO Matt Cole (whose company holds about $44 million in Stretch and issues its own perpetual preferred stock) believes that traditional brokers cutting clients' borrowing limits, rather than DeFi, is the major driver behind the initial forced sell-off. "DeFi has learned many lessons about leverage over the years. People who over-leverage will get wiped out," he said, "This drop in STRC and the broader digital credit market serves as a reminder for investors to be extremely cautious when looping leverage."

Saylor has gone all in, starting to take some drastic measures. Strategy's common stock recently trades around $92, down about 78% over the past year. According to Saylor's own controversial metric mNAV (common stock market value divided by the company's Bitcoin value), the current stock price is deeply discounted by 33% compared to Bitcoin's value. For years, the company’s mNAV has comfortably been above 1.0, allowing it to issue shares at prices higher than Bitcoin-supported values, using proceeds to buy more Bitcoin.

Recently, Saylor came up with a "clever" way to fix the severe mNAV issue. On July 23, Strategy announced on X that it would abandon the original formula, adopting a new algorithm that just barely keeps the metric above 1.0. "The Bitcoin capital market needs a new financial language," Saylor said.

The new algorithm is calculated as follows: mNAV equals the stock price divided by "net Bitcoin per share"—which is the value of Bitcoin treasury, minus the value of out-of-the-money convertible bonds and preferred stock, plus the dollars reserved specifically for dividends, divided by the fully diluted share count. By this more complex algorithm, the ratio becomes 1.02. A miracle occurs! Strategy's mNAV is no longer deeply discounted.

"The only version showing a discount is the one they never use, and that is the one investors should be looking at," Cameron pointed out, "Nothing in reality has changed; only their self-fabricated mNAV metric has changed."

Surprisingly, there are still investors buying into Saylor's maneuvers.

"I expect Stretch to continue trading at a discount until Bitcoin breaks out of the current range (around the mid $50,000s to the mid $70,000s). If Bitcoin crashes, it will go lower," said Wall Street veteran and co-founder of algorithmic trading platform CoinRoutes, Dave Weisberger.

However, Weisberger also believes that Strategy's recent actions have "essentially reversed the death spiral." Shorts originally assumed that selling Bitcoin would crash the price, forcing the company to continue selling, and unless Bitcoin rebounded, Strategy would lose access to the capital markets. The result was that: Strategy sold Bitcoin, and the price did not significantly drop; then they issued more shares and accumulated nearly two years' worth of cash coverage. "Neither disaster scenario has occurred," he said.

"Strategy doesn't need to go bankrupt, and investors will also get hurt," Cameron warns, "The company's true mNAV has compressed to 0.67; with Bitcoin prices dropping, shareholders are still being diluted. It will take a long time for them to return to their initial investment levels."

For Saylor's sake, it is hoped that those Bitcoin loyalists he has always relied on will be patient investors as well.