Bitcoin's stubborn slide below $60,000 delivered fresh damage to Strategy's preferred stock on Friday, as STRC plunged to a record low and forced sharp questions about whether the Bitcoin-buying firm's capital structure can hold together under prolonged market pressure.
STRC Hits $71.25, Sitting 25% Below Its Design Level
Shortly after U.S. markets opened, STRC dropped to a new all-time low of $71.25 before partially recovering to $75.30, a nearly 0.5% decline on the day, according to Yahoo Finance. That placed the stock roughly 25% below the level at which STRC is engineered to trade, a gap that has rattled retail investors who bought the product expecting a bond-like income stream with steady dividend payments.
Saylor Posts on X, but Markets Stay Cautious
Strategy's Executive Chairman and co-founder Michael Saylor acknowledged the turbulence in a post on X, writing that "volatility tests every capital structure," while insisting the company stays focused on Bitcoin and on "disciplined capital allocation, credit quality, and long-term value creation." The statement offered little in the way of specifics and did little to reassure observers keeping a close watch on the firm's fast-thinning cash position.
A Brutal Week for Bitcoin Sets the Stage
The pressure on STRC flows directly from a damaging stretch for Bitcoin. Over the past week the cryptocurrency slid roughly 5% to $60,130, having touched a 21-month low of $58,188 on Thursday, according to CoinGecko. The decline has been compounded by heavy outflows from Bitcoin exchange-traded funds and the looming expiry of $10.6 billion worth of options positions on Deribit, which are drawing close to settlement.
Analysts Try to Clock Strategy's Cash Burn
Andy Baehr, managing director at crypto asset management trading firm GSR, said that market observers are actively trying to work out how fast Strategy is burning through its remaining cash as STRC's volatility tests investor patience. Baehr noted that the product had been positioned to retail investors as something resembling a bank account, offering predictable yield in exchange for Bitcoin exposure.
"They suspect that Michael Saylor has painted himself into a corner, and that his tablets of commandments may crumble. I reckon that most [STRC] buyers did not sign up for a 25% drawdown. They came for yield." - Andy Baehr, GSR
More Than $10 Billion Raised, Cash Cushion Running Thin
In under a year, Strategy has raised more than $10 billion by issuing STRC, generating what analytics platform CryptoQuant described this week as ballooning costs. At the start of the year in January, Strategy held $2.25 billion earmarked to cover dividends and service its debt. That buffer has since worn considerably thin as the company's obligations have grown.
CryptoQuant, a South Korean analytics firm, flagged that as Strategy's Bitcoin holdings slip deeper into negative territory, any sales beyond the 32 BTC liquidation announced earlier this month risk crystallizing losses for common shareholders and eroding overall shareholder value.
Strategy's common stock also felt the strain on Friday, falling as low as $82.33 before briefly turning positive during the session. At $85.80 apiece, shares had ticked up roughly 0.5% on the day.
847,363 BTC and $13.1 Billion Underwater
At Bitcoin's recent trading price, Strategy's total stockpile of 847,363 BTC was valued at close to $51 billion. But given the average cost basis across those purchases, the position was sitting roughly $13.1 billion underwater, underscoring the scale of the company's exposure to any further Bitcoin weakness.
A Possible Eighth Dividend Hike on the Horizon
Nic Carter, founding partner of investment firm Castle Island Ventures, argued in a post on X on Thursday that Strategy may be forced to raise STRC's dividend rate for an eighth time since the product was first introduced. Carter evaluated STRC not as a traditional preferred stock but through the prism of a junk bond investor assessing a deeply discounted instrument.
STRC currently carries an 11.5% annual dividend. However, because the stock is trading well below its $100 par value, the effective yield implied by the current market price has already climbed above 15%, reflecting the additional risk investors now associate with holding the product.
"Because the structure is unsustainable and requires the perpetual monetization of the common equity, which is trading near par, it will continue to trade at a discount unless Strategy hikes the yield on STRC to the appropriate range, which is 15-20% in my opinion." - Nic Carter, Castle Island Ventures
