Written by: Little Cake, Deep Tide TechFlow

In July last year, when Michael Saylor pitched STRC to Wall Street, he used a clever metaphor: it is a "digital credit engine." Investors buy this preferred stock and receive an annual high dividend of 11.5%; Strategy uses the raised funds to buy Bitcoin; when Bitcoin rises, STRC stabilizes around a face value of $100, and the company continues to issue more shares and buy coins. Capital flows continuously in this closed loop, making every participant a winner.

In less than a year, this engine has stalled.

On June 19, STRC dropped to $85.32 during trading, setting a new historical low. The previous trading day, it briefly touched $82.53, which was more than a 17% discount from face value. RSI fell to 24, entering extreme oversold territory. Trading volume surged to nearly 8 million shares, far exceeding the daily average of 3.6 million shares.

For a preferred stock designed to "stabilize around $100," falling to $85 indicates that the underlying logic is weakening.

What kind of machine did Saylor build?

To understand the collapse of STRC, one must first understand the purpose for which it was created.

STRC stands for "Variable Rate Series A Perpetual Stretch Preferred Stock," listed in July 2025 at an issue price of $90, with approximately 28 million shares issued, raising $2.5 billion. Its dividend rate adjusts monthly and is currently set at 11.5%. The design intent is clear: through a floating rate mechanism, keep STRC trading close to its face value of $100.

When STRC is trading above $100, Strategy can continue issuing new shares through the ATM (at-the-market) plan, converting the premium into cash, which is then all invested back into Bitcoin. This is the core gear of Saylor's capital machine, with MSTR common stock absorbing Bitcoin volatility, while STRC continuously produces ammunition.

In April this year, in its proxy statement, Strategy boasted about the data from this machine: STRC's market capitalization was $6.4 billion, 30-day average trading volume was $339 million, and volatility was just 1.7%. Saylor referred to it as a "non-cyclical financing tool," meaning this machine could keep turning regardless of Bitcoin's ups and downs.

Reality dealt him a sharp slap in the face.

Triple Blow

The collapse of STRC has three mutually reinforcing driving forces.

First, the price of Bitcoin has halved. BTC has dropped from its historical high last October to around $63,000 now, a decline of over 50%. On June 17, the newly appointed Federal Reserve Chair Kevin Warsh presided over the first FOMC meeting and released hawkish signals, with the dot plot indicating that nine officials expect interest rate hikes in 2026, and PCE inflation expectations raised to 3.6%, while the forward guidance on interest rates was completely removed. On that day, Bitcoin decoupled from the stock market, as the S&P 500 and NASDAQ rose sharply due to news of a peace agreement between the U.S. and Iran, while BTC fell against the trend.

Second, the dividend coverage ratio is in trouble. In May, Strategy used $1.5 billion in cash to repay convertible bonds maturing in 2029. This operation directly compressed STRC's dividend coverage period from 24 months to about 7 months. With 28 million shares of STRC and an annualized 11.5% dividend rate based on a face value of $100, the cash dividends required each year exceed $320 million. After the cash reserves shrank, the market began to question: where is the money coming from?

The answer was revealed on June 1. Strategy disclosed that during the period from May 26 to 31, the company sold 32 Bitcoins at an average price of $77,135, cashing out about $2.5 million to pay STRC's dividends.

This was Saylor's first sale of Bitcoin since 2022.

32 BTC is negligible compared to the 840,000 Bitcoins held by Strategy, accounting for less than 0.004%. The amount was only $2.5 million. Saylor's own explanation was "vaccination," proactively selling once to let the market get used to it, reducing panic expectations.

The market did not accept it. MSTR fell over 4% in after-hours trading. The logic of investors is simple: when a person who promised to "never sell coins" starts selling coins, no matter how much is sold, faith has already begun to crack.

Third, competitor Strive's SATA is stealing STRC's investors. SATA is also a Bitcoin-backed preferred stock, currently trading close to its $100 face value, with an annualized yield of about 13%, higher than STRC's 11.5%. More critically, SATA changed to paying dividends every business day starting June 16, a frequency far higher than STRC's bi-monthly payments. Strive has no outstanding debt, and SATA is in the most senior position in its capital structure, needing no cash flow tussle with convertible bondholders.

The price difference between STRC and SATA has expanded to about $15, setting a historical record. Both are high-yield preferred stocks backed by Bitcoin; one is at face value, while the other is at a 17% discount. The market is voting with its feet.

Reverse Flywheel

The chain reaction triggered by STRC breaking its face value is precisely a reflection of the design intent of Saylor's capital machine.

The positive cycle is: STRC trading above $100 → ATM issuance → cash inflow → buy Bitcoin → Bitcoin rises → STRC stabilizes → continues to issue.

The reverse flywheel is: Bitcoin falls → STRC breaks below face value → ATM pauses → financing channels close → forced to sell coins to pay interest → market confidence damaged → STRC further declines.

Strategy has already paused the premium issuance plan for STRC. This means the company has lost an important tool for acquiring Bitcoin. Meanwhile, bearish activity on STRC in the options market has noticeably increased.

Saylor's rebuttal also has some logic: he calculated in a recent public appearance that for every Bitcoin sold for interest payments, Strategy can buy back 10 to 20 through other capital operations. The entire model only needs a yearly increase of 2.3% in Bitcoin to operate sustainably. Strategy currently holds over 840,000 Bitcoins, with an average cost of about $75,540, and the current price is $63,000, incurring an unrealized loss of over $10 billion, with Q1 already recording a net loss of $12.54 billion.

Mathematically, Saylor's argument may hold water. The problem is that the market never looks at mathematics alone. When STRC's price signals continue to deteriorate, when the narrative of "selling coins to pay interest" replaces the faith of "never selling coins," no matter how precise the model, it cannot stop the flow of funds out.

STRC Test is Faith

As STRC falls to $85, the survival of Strategy is not threatened. Preferred shares rank above common shares but below debts in the capital structure, and the interests of bondholders are unaffected. The 840,000 Bitcoins in Saylor's hands are also not at risk of forced liquidation.

What is truly being tested is something more fundamental: can the Bitcoin treasury company model maintain the operation of its financing machine during a bear market?

Last year, STRC was Saylor's proudest invention, a financial product that allowed traditional fixed-income investors to participate in the Bitcoin narrative. Today, it has turned into a mirror, reflecting the vulnerability of leverage strategies in counter-cycles.

Bitcoin only needs to rise 2.3% to get this machine running again. But in the current environment where the Federal Reserve has released hawkish signals, interest rate hike expectations have reignited, and the fear-greed index has fallen to 22 (extreme fear), the seemingly trivial number of 2.3% weighs more than ever.