From holding cryptocurrency narratives to cash flow pressures, Strategy is undergoing structural testing.

Written by: Conflux

Recently, the dividend preferred stock STRC issued by Strategy has fallen below the par value of $100, prompting a renewed discussion in the market about the "Bitcoin treasury company" model.

In the past, people looked at Strategy primarily for two questions—how much Bitcoin it has bought and whether Bitcoin can rise further. Now, a third question has become equally important: when a company uses high-volatility, non-cash flow assets to support a capital structure with continuous dividends, will the financing cost spiral out of control before the asset prices?

This is not a simple matter of "bullish on Bitcoin" or "bearish on Strategy." The fact that STRC has fallen below par value does not mean the company has already fallen into default.

More accurately, it is a repricing of the balance sheet: the market has begun to price not only Strategy's Bitcoin holdings but also its financing cycles, sources of dividends, and reliance on capital markets.

STRC is not a stablecoin, and $100 is not a hard peg

The Bitcoin treasury model of Strategy is often summarized as "financing to buy Bitcoin." But more specifically, it has actually made three layers of transformation—

• The first layer converts publicly traded company stocks into Bitcoin exposure: investors buying MSTR are not just buying a software company but are purchasing a leveraged Bitcoin proxy asset with financing capability and active management involvement.
• The second layer converts Bitcoin holdings into capital market credit: after holding a large amount of BTC, Strategy can issue common stock, convertible bonds, and preferred stock based on company valuation, market interest, and asset scale, and then use these funds to continue buying BTC or support the capital structure.
• The third layer packages non-cash-flow-generating BTC into securities that can pay cash flow to investors: the attractiveness of preferred stocks like STRC comes from the combination of "high-frequency dividends + priority over common stock + BTC asset coverage." However, BTC itself does not pay interest and does not generate operational cash flow. Strategy also clearly states in the STRC document that Bitcoin does not pay interest or other returns, and if cash is to be obtained from Bitcoin holdings, it relies on selling.

This is the core tension of the structure: the asset side is high volatility, non-cash-flow assets; however, the liability and quasi-liability side requires continuous cash expenditure. In a bull market, this tension is masked by rising asset prices. BTC rises, the MSTR premium expands, and the company finds it easier to issue stock or preferred stock, reinforcing the market narrative of financing to buy Bitcoin. This cycle appears positive.

But during an adjustment phase, the order may reverse: BTC falls, the MSTR premium contracts, the STRC discount widens, financing costs rise, buying capacity decreases, and the market reassesses the entire model.

The significance of STRC falling below par value lies here; it indicates that pressure has shifted from "asset price fluctuations" to "financing tool prices."

Book losses are not the most dangerous; cash flow mismatch is

Strategy's BTC holdings are very large. According to the latest data, the company holds 847,363 Bitcoins, with an average cost of about $75,651. If BTC fluctuates in the range of $62,000 to $64,000, rough estimates suggest that the book loss on holdings is approximately between $9.5 billion and $11.5 billion.

However, the book loss itself does not necessarily constitute a liquidity crisis. If the company has no short-term debt repayment pressure and is not forced to sell BTC, the floating loss can exist long-term. The real concern is cash expenditure: preferred stock dividends, debt interest, cash reserve replenishment, and whether the common and preferred stock markets are still willing to provide funds.

Strategy disclosed that as of May 25, the company has $6.7 billion in convertible bond principal, $15.5 billion in preferred stock nominal value, and $871 million in cash reserves. Among these, the company's preferred stock dividend obligations have reached approximately $1.7 billion annually.

In contrast, the scale of Strategy's traditional software business has struggled to cover such capital expenditures. The company's first-quarter revenue was $124.3 million, with a gross profit of $83.4 million. It is still a company with a software business, but what capital markets are now concerned about is clearly no longer how much operational profit the software business can generate, but whether financing channels can continue to support the Bitcoin treasury structure.

This is also the sensitivity of STRC—preferred stock is not debt and theoretically does not have the maturity repayment pressure of bonds; yet, continuous dividends create a de facto cash flow commitment. Once dividends are stopped or delayed, the legal consequences may differ from debt default, but the market signal will be very strong.

Three costs: which one becomes unacceptable first?

In the STRC document from March, Strategy expressed that at that time, the intention was to ensure the future issuance of STRC at a price not lower than $99 and not higher than $101. In other words, when STRC remains below $99 for an extended period, the efficiency of STRC as a financing tool will significantly decline.

This does not mean that the company is completely unable to finance. It can still issue common stock, use cash reserves, or engage in other capital market operations. However, issuing common stock also has another constraint: if the premium of MSTR's stock price relative to the value of the BTC holdings decreases, continuing to issue common stock to buy BTC may dilute the "Bitcoin per share" metric.

Strategy has consistently emphasized metrics like BTC Yield and Bitcoin Per Share, indicating that the company is also concerned about whether financing has an impact on common stock shareholders. Therefore, when STRC is below par, the MSTR premium contracts, and BTC drops below the holding cost simultaneously, several of Strategy's financing gears will tighten together.

A more neutral way to observe is not to ask "how long can the Bitcoin treasury model hold up," but rather which of the three costs in this model becomes unacceptable first.

• Dividend cost: STRC has risen from 9% to 11.5%, already indicating that the company needs to maintain attractiveness with a higher yield. If the discount continues to widen, theoretically continuing to raise interest can enhance attractiveness, but at the same time, it will also raise future cash expenditures. The higher the interest rates, the more it resembles high-yield credit products rather than low-volatility cash management tools.
• Dilution cost: If the company supplements cash or pays dividends by issuing common stock of MSTR, short-term liquidity can be maintained, but common stock shareholders will pay attention to dilution. If issuing stock to buy BTC does not improve the per-share BTC, the market may reevaluate the premium of MSTR relative to BTC.
• Asset disposal cost: Strategy's long-standing narrative to the market has been "long-term holding of Bitcoin." If BTC is sold for liquidity, debt management, or dividend pressure, even if the amount is small, it will alter the market's understanding of its "buy and hold" image. Barron's reported that the company recently made a tactical sale of BTC, which is a signal worth observing but cannot simply be equated with being forced to sell.

Therefore, the real pressure test is not how much BTC fell on a given day, but when the financing costs, dilution costs, and costs of selling BTC rise simultaneously, which type of investor the company will prioritize protecting: common stock, preferred stock, or the size of Bitcoin holdings.

Impact on the crypto market

Strategy's impact on the crypto market is not only about how much BTC it holds but also about how it used to represent a stable, predictable marginal buyer.

When STRC can be successfully issued and MSTR has a higher premium, Strategy can continue to raise funds from the capital market to buy BTC. This buying pressure is significant on an emotional level, as it provides the market with a narrative of "someone is continuously absorbing supply."

However, if STRC remains below par for an extended period, preferred stock financing would be suspended or costs would significantly rise; if the issuance of common stock is also constrained by dilution, then Strategy's pace of buying Bitcoin will slow down. For the BTC market, this may not immediately create significant selling pressure, but it will reduce an important buyer.

The greater risk lies in the narrative aspect. If the market starts to believe that "Bitcoin treasury companies will also be constrained by financing windows," then the valuation logic of similar models may be re-priced.

In the past, the market gave them a BTC exposure premium; in the future, it may require deducting financing costs, dividend burdens, liquidity risks, and asset discounts. This will turn "companies buying Bitcoin" from a bull market narrative into a balance sheet management issue.

Conclusion

STRC falling below $100 does not mean that the Strategy model has immediately failed, nor does it indicate that Bitcoin treasury companies will collectively collapse. It is more like a turning point: the market is beginning to realize that holding a large amount of BTC is only half of the model; the other half is how to finance these BTC and pay for the financing costs.

In a Bitcoin bull cycle, the asset side will speak for the structure. In a Bitcoin adjustment cycle, the liability side will demand explanations.

Strategy's experiment continues; it has substantial Bitcoin holdings, capital market experience, and still possesses various financing tools. However, the discount of STRC keeps reminding the market—

When non-cash-flow-generating assets are packaged as securities paying continuous dividends, what truly determines the lifespan of the model is not just the Bitcoin price, but also the financing window, cash reserves, dividend costs, and how long investors are willing to pay a trust premium for this structure.