7.08 million accounting losses exposed, Bitcoin preferred shares are no longer a stable income tool.

Written by: Liam 'Akiba' Wright

Translated by: Saoirse, Foresight News

The preferred shares issued by Bitcoin reserve companies are no longer just simple income-generating assets, but have become a credit gauge for assessing the robustness of Bitcoin companies' balance sheets. While the market's focus remains on Strategy, the data disclosed by Strive, the seventh largest publicly listed company by Bitcoin holdings, intuitively illustrates the real impact of risk spillover: another Bitcoin reserve company holds preferred shares in Strategy, and the value fluctuation of this holding has already become a clear signal of market stress.

In the update document released by Strive on June 29, it was disclosed that during the period from June 18 to June 26, the number of shares it held, 505,000 STRC shares, did not change, but the fair value of this holding dropped from $44.738 million to $37.658 million.

In just 8 days, the number of shares remained unchanged, yet the holding value evaporated by $7.08 million. Based on the reported fair value, the market valuation of Strive's STRC fell from approximately $88.59 per share to $74.57.

This disclosure document does not prove that the company is insolvent, forced to sell assets, or that its capital structure has completely failed, but it reveals a more critical fact: even without a major crisis, the risks of Bitcoin reserve preferred shares can transmit through cross-holdings of companies' balance sheets.

As of June 26, Strive still held 19,864 Bitcoins, with $141.7 million in cash and equivalents, while it had a total of 7.829502 million SATA preferred shares outstanding. However, the core signal released by this financial report lies not in the scale of its own assets, but in the exposure of its holding of Strategy preferred shares, which has completely altered investors' judgment logic regarding the entire sector.

There has been ongoing controversy in the market regarding the STRC issued by Strategy: will investors treat this product as a stable income target, or see it as a high-risk credit asset linked to Bitcoin trends, market liquidity, and Strategy's ability to pay dividends? Strive’s disclosure has intensified this question.

The cross-holdings of different Bitcoin reserve companies build a clear and visible channel for cross-company risk transmission. Once STRC shows discounted trading, Strive will reflect asset losses in its fair value; if Strive's issuance of SATA preferred shares also faces market skepticism, the market can intuitively determine whether the current pressure is merely a single company issue or if it has spread throughout the entire industry via the preferred share financing model.

The initial selling point of these reserve preferred shares was stable returns, fixed par value, and regular dividends, which is extremely attractive to investors preferring steady income. However, when market attention shifts to par value discount rates, cash reserve coverage ratios, dividend adjustment mechanisms, share repurchase, and potential asset sell-offs, the trading attributes of these securities will completely shift to those of credit risk assets.

The core issue that investors are most concerned about now is: does the issuer have sufficient cash, smooth financing channels, and enough Bitcoin liquidity to guarantee the credibility of dividend payments?

Strive's holding of STRC preferred shares has demonstrated an unrealized loss of $7.08 million over 8 days, exposing the risks of industry cross-holdings, while listing the entire set of tools used by Strategy to stabilize, including cash reserves, high dividends, coin sales, and additional issuances, combined with third-party institution estimates showing the fair valuation of STRC is only $49.887, and the current Bitcoin market price is far below the company’s holding cost, prompting the need to closely track the discount of preferred shares, dividend coverage ability, and Bitcoin sell-off actions to judge industry risk trends.

Strategy's New Operating Plan: Essentially Credit Risk Management

The regulatory document submitted by Strategy on June 29 further confirms the above logical shift. The company has launched a set of digital credit capital frameworks, with policies including dollar reserve management rules, revised STRC dividend plans, preferred share repurchase plans, common stock repurchase plans, and Bitcoin monetization plans. This toolkit is specifically designed to cope with pressured capital structures.

Strategy disclosed that as of June 28, its dollar reserve amount reached $2.55 billion; the board has mandated that management must retain at least enough cash reserves to cover the annual dividends and interest expenses of preferred shares for the next 12 months, unless the board specifically approves a reduction of this standard. The document also states that reserve funds can be replenished through the Bitcoin monetization plan by selling tokens, or through other capital market operations.

This reserve is crucial because Strategy has raised the regular annualized dividend of STRC to 12%, to be paid out in two installments per month, applicable to the shareholding registration dates of July 1 and thereafter. The company has announced that for the settlement periods of July 31 and August 15, the cash dividend per share will be $0.50, with specific payment conditions as per the STRC issuance agreement.

While raising dividends can provide short-term support for this income-generating product, it also brings about new questions: if securities continue to trade at a discount, can this high dividend be maintained long-term?

Strategy clearly outlines the interconnected logic of its policies: the STRC dividend plan will comprehensively reference the secondary market price of STRC, the overall market yield, credit spreads, Bitcoin prices and volatility, reserve coverage ratios, capital market environment, and the company's overall capital structure. The document also emphasizes that the STRC dividend does not have a rigid repayment guarantee and will not be unilaterally raised just because the market price of STRC is below par.

The entire policy system is entirely framed within the proactive credit management mindset. The company has also authorized a maximum repurchase amount of $1 billion for its digital credit securities; should management determine that the repurchase would enhance corporate value and optimize the capital structure, STRC will be prioritized for repurchase; additionally, a further $1 billion is authorized for repurchasing Class A common stock. The above repurchase authorization does not represent a must-execute by the company, but clearly demonstrates the tools available to management if discount risks continue to worsen.

In this same capital framework, Bitcoin sales have also been incorporated as formal response measures. The board has approved a Bitcoin monetization plan, which can raise up to $1.25 billion by selling Bitcoin to replenish dollar reserves; should management determine that this approach is better than issuing new common stock or other capital market operations, the funds raised can be used to cover preferred share dividends and interest expenses, as well as to provide capital for share repurchases.

The company explicitly states that this plan does not involve compulsory Bitcoin sales, but this authorization fundamentally alters the market narrative: this company, which was originally focused on accumulating Bitcoin as its core business, now possesses a formal channel through which Bitcoin assets can stabilize the credit system.

Fair Value Assessment, Core Test on Dividend Sustainability

The STRC fair value calculator made public by third-party institution Farside can explain why the market's focus of discussion has long moved beyond surface yield rates. CryptoSlate checked the tool's data on July 7, finding that under preset calculation conditions, the net present value of STRC is only $49.887 per share; the calculation model assumes an initial coupon rate of 11.50%, reducing to 3.60% starting from the 33rd month.

This assessment carries critical underlying assumptions: the company operates normally and permanently pays full dividends. This valuation is not an official pricing from Strategy and should not be confused with the 12% annualized STRC dividend policy announced by Strategy, but it clearly reflects the core variables that preferred share investors truly care about: valuation is highly dependent on dividend sustainability, discount rates, and the issuer's ability to keep paying interest under Bitcoin market conditions and capital market fluctuations.

The broader Bitcoin market environment further amplifies this credit test. According to CryptoSlate's Bitcoin market data, on July 8, Bitcoin was quoted at around $62,000, with a 24-hour decline of 1.8%, and a 7-day gain of 5.5%, totaling a market cap of $1.24 trillion, with Bitcoin's market value accounting for 58% of the entire cryptocurrency market.

However, the Bitcoin holding data from Strategy as of June 28 shows that the company holds 847,363 Bitcoins at an average holding cost of $75,651. Although the current market price is far below the average holding cost, which would not force the company to sell instantly, it explains why the market is highly focused on reserve policies, demand-driven issuance mechanisms, and Bitcoin monetization-related terms.

Strategy's at-the-market (ATM) issuance data intuitively reflects that this business model still has sufficient financing space. From June 22 to June 28, the company did not issue preferred shares through the ATM channel, only selling 12,669,017 shares of MSTR common stock, raising a net of $1.1524 billion; the remaining issuance capacities are as follows: for STRC preferred shares, $17.5108 billion; for MSTR common shares, $24.2575 billion, while other preferred share issuance plans are also in place.

The whole business model still possesses multiple buffering tools, but the key question is: when investors demand higher yields, securities trade at steep discounts, or stronger floor assets are needed, what cost will be required to utilize these tools.

Two Scenarios to Judge Whether Risks Are Widespread

The current market has divided the outlook into two core judgment logics:

Scenario One: Risks are Limited, Only Affecting Strategy

The discount of STRC narrows, dollar reserves and dividend policies stabilize market sentiment, the Bitcoin monetization plan is merely a backup, and the asset impairment suffered by Strive is just a one-time short-term shock caused by cross-holdings, with the remaining reserve companies in the industry being unaffected and pressure only focusing on Strategy itself.

Scenario Two: Risks are Widespread

The STRC maintains a deep discount for the long term; the raised dividend cannot appease the market; the company increasingly relies on common stock follow-on issuance channels; the Bitcoin monetization plan turns from authorization to actual sell-off; simultaneously, Strive's own issued SATA preferred shares come under pressure, no longer seen as independent products, but rather classified by the market as high-risk assets along with STRC. At that point, Bitcoin reserve preferred shares will evolve from a single enterprise problem to a systemic risk for the entire sector.

The existing disclosure documents do not prove that the second scenario has occurred, but they sufficiently explain the root of market concerns: Strive's holding of STRC has directly transformed the discount risk of Strategy into a fair value loss on another company's financial statements.

The entire framework released by Strategy integrates dividends, cash reserves, share repurchases, demand-driven issuances, and potential Bitcoin sales into a unified risk buffer system; while the Farside valuation tool highlights that corporate sustainability and assumptions of permanent dividends are the core determinants of preferred share value.

The key indicators for future market observation are very clear: whether the discount of STRC and SATA relative to par value expands, whether the cash coverage of dividends is credible, whether the company will increase the issuance of common or preferred shares, and whether Bitcoin sales will remain in the authorization stage.

The financial report to be disclosed by Strive in the future will become a key signal to determine whether its loss on Strategy preferred shares is just an isolated case or the first public indication that Bitcoin reserve credit risks are spreading throughout the industry via the preferred share model.