As Bitcoin continues to fall below the $60,000 mark, concerns over the sustainability of Strategy’s (MSTR) financing model are spreading rapidly, becoming a significant catalyst for the recent continued decline in the cryptocurrency market. Analysts believe that this not only puts the largest institutional buyer of Bitcoin to the test but also reveals cracks beginning to appear in the important financing system that has supported Bitcoin demand over the past two years.
The core of market concern lies in Strategy’s long-term reliance on issuing securities such as common stock and preferred stock to raise funds, and then using the proceeds to continuously purchase Bitcoin. This model has helped the company become one of the largest corporate holders of Bitcoin globally and has also served as a crucial source of incremental funding driving Bitcoin’s sustained upward momentum.
As Bitcoin prices remain below $60,000 for an extended period and the company’s financing costs continue to rise, the price of Strategy’s preferred stock, STRC, has dropped sharply, and an increasing number of investors are beginning to question whether this financing model can continue to operate. STRC was once regarded as an important financing product launched by the company for the mass market, aimed at attracting ordinary investors to participate in the company’s Bitcoin strategy through relatively high monthly dividend yields. However, the preferred stock price has fallen from its issuance price of $100 to approximately $75, leaving many investors with unrealized losses.
As buy-side demand continues to diminish, STRC’s yield has been climbing, significantly raising Strategy’s future costs of issuing preferred stock for financing, thereby weakening its ability to continue purchasing Bitcoin on a large scale. Alex Blume, founder and CEO of Bitcoin asset management company Two Prime, stated that Strategy’s recent persistent weakness is reminding the market of several major risk events in the crypto industry’s past.
Market participants point out that STRC is not an ordinary yield-bearing security but rather one of the most important financing tools for Strategy’s continued accumulation of Bitcoin. If investors are only willing to purchase STRC at a substantial discount or are even unwilling to subscribe at all, the company’s financing costs will rise further, thereby affecting its ability to continue buying Bitcoin, which could also undermine the most stable source of institutional buying demand in the Bitcoin market.
Analysts note that STRC represents an attempt at crypto-financial innovation in recent years, namely packaging highly volatile crypto assets through yield-bearing securities to attract a broader range of investors. However, unlike traditional corporate bonds, STRC has no fixed maturity date and is not backed by Bitcoin assets as collateral, and its dividends can be reduced or suspended at the discretion of the board of directors. The actual risk is far higher than many investors initially realized. Andreja Cobeljic, head of derivatives trading at Amina Bank, stated that while Bitcoin’s recent decline is partly due to cyclical market weakness, what is truly driving the deterioration in market sentiment is the decline in investor confidence in Strategy’s financing model.
Market concerns intensified further starting in early June this year, when Strategy disclosed the sale of 32 Bitcoins, marking the company’s first sale of Bitcoin since 2022. Although the sale size is negligible relative to its massive holdings, this move broke founder Saylor’s long-standing pledge of “never selling Bitcoin” and has prompted the market to reassess the core assumptions upon which its financing model was built.
