Original | Odaily Planet Daily (@OdailyChina)

Author｜Azuma (@azuma_eth)

Strategy's preferred stock STRC is experiencing a continuous "unpegging."

U.S. stock market data shows that since May 15, STRC has gradually deviated from the target par value of $100, and the recent discount has intensified significantly, touching a low of $83.26 during yesterday's trading, and closing at $88.59, more than "unpegged" from the target par value by over 11%.

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

In the initial design of Strategy, STRC was created as a yield-bearing security operating around a par value of $100, rather than a highly volatile speculative asset. Now, as the market price deviates increasingly from the target par value, more investors are starting to reassess the logic behind this product.

Moreover, with Strategy continuously expanding 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 toward a preferred stock but also the market's confidence in the entire capital operation model of Strategy.

STRC: The Engine of Strategy's Capital Flywheel

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

STRC is an innovative financial derivative introduced 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 yields, resembling securities with fixed income properties.

• Odaily Note: Strategy founder Michael Saylor recently revealed that STRC was designed with the aid 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 Strategy's current capital flywheel.

Prior to launching STRC, Strategy primarily relied on issuing convertible notes and directly increasing the issuance of common stock to raise funds for purchasing Bitcoin. However, both methods have their limitations—convertible bonds are subject to maturity dates and the maximum debt leverage ratio, while frequent issuance of common stock dilutes the equity of existing shareholders.

The emergence of STRC perfectly addresses this pain point, with its core utility in Strategy's strategy primarily 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 mandatory maturity repayment pressure and does not possess the voting rights and residual asset distribution rights of common stock. This means that Strategy can create billions of fiat purchasing power without diluting MSTR shareholders' equity or increasing rigid debt interest, fully investing it into increasing Bitcoin holdings.

Through the closed loop of "Issuing STRC ➡️ Raising Fiat ➡️ Purchasing BTC ➡️ Enhancing Company Net Assets ➡️ Increasing STRC Credibility," Strategy has successfully built a seemingly infinite 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 ATM raising terms and market arbitrage logic, Strategy will no longer be able to effectively attract funds through discounted preferred stock, and the entire capital magic will factually come to a halt.

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 for "monthly dynamic adjustment of dividend rates." Simply put, when the market price of STRC falls below $100, Strategy can raise the dividend rate to enhance the product's attractiveness; when the price exceeds $100, the dividend rate can be lowered—in theory, by constantly 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 rate to a high of 11.5% and changed the payment frequency from monthly to bi-monthly, STRC's "unpegging" status has not been effectively repaired... Why is this?

Reasons for Unpegging: Confidence, Confidence, and More Confidence

The failure of the dividend adjustment effect means that the market is pricing the risks that have exceeded the STRC yield itself. From the current market discussions, the concerns about risk are mainly reflected on two levels.

First, there are the surface-level technical factors. Some market participants believe that the recent declines are largely due to the concentrated sell-off during the deleveraging of arbitrage funds.

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

But if we merely use leveraged sell-off to explain the current market performance, it seems still insufficient. For many investors, deeper concerns lie in Strategy's liquidity reserve situation.

Earlier this month, JPMorgan released a research report indicating that Strategy has approximately $1.7 billion in annual dividend payment obligations, and based on the current cash reserve levels, the cash on hand is only sufficient to cover about 6.3 months' worth of preferred stock dividend payments. This has raised market concerns about Strategy's promised future liquidity coverage capabilities.

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

However, the issue is that these two statements are actually built on different premises. JPMorgan focuses on the cash position of Strategy, while Strategy's calculations implicitly assume an important hypothesis—that the company can obtain funds by selling Bitcoin if necessary.

This precisely touches on the market's most sensitive points. Earlier this month, Strategy sold its Bitcoin holdings for the first time, although the scale of this sale was only 32 coins, and the official narrative framed it as "actively conducting market desensitization tests," mentioning that "more will be bought back in the future," but this action 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 delivering a core narrative to the market—Bitcoin is a long-term strategic reserve asset, and the company will use capital market financing to acquire operating funds, not rely on selling Bitcoin.

Therefore, when the market first saw Strategy actually selling Bitcoin, it inevitably raised greater concerns—if the future financing environment tightens, will Strategy need to further rely on selling Bitcoin to meet dividend obligations? If the answer is not an absolute negative, then investors must reassess the risk level of relevant securities.

From this perspective, the ongoing "unpegging" of STRC is, in fact, a market reassessment of the robustness of the entire Strategy capital structure.

Strategy's Buying Power May Turn into Selling Pressure

For Strategy, the biggest impact of STRC's continued unpegging 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 obtain funds from the capital market through the issuance of stocks, convertible bonds, and preferred shares, and then use the funds to increase Bitcoin holdings. STRC is Strategy's most important financing tool, and when it is traded long-term below the target par value of $100, it means that the market is demanding higher risk compensation, and Strategy's financing ability will thus fall into temporary downtime.

Going forward, the re-pegging 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 continuous limitations on financing ability, while Strategy's cash reserves continue to deplete, then market concerns about Strategy possibly needing to sell more Bitcoin to meet dividend payment requirements will inevitably intensify.

Once this expectation strengthens, its impact will not be limited to STRC itself. As one of the most significant marginal buyers in the Bitcoin market in recent years, Strategy's financing capability and accumulation pace have profoundly influenced market supply and demand expectations; if Strategy's buying turns into selling, it could create unimaginable downward pressure on Bitcoin.

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