Late Stage Capitalism
Physician, Long-Term Stock Investor with 30 Years of Experience
STRC, the preferred stock tied to Strategy, is a Ponzi-like structure that will be Strategy's downfall unless it is shut down. The structural problem cannot be fixed while it exists, and management's stubbornness risks a massive loss of confidence in Strategy. If Strategy sells bitcoin to cope, lower bitcoin prices could follow in a vicious cycle. As long as STRC exists, believers in bitcoin should just own bitcoin. x.com x.com x.com
Strategy's STRC structure works like a Ponzi scheme: without constant bitcoin appreciation, paying its roughly 11% dividend and holding STRC at $100 requires new money. STRC has already lost its peg. Strategy raised about $63B yet holds about $51B of bitcoin, a $12B loss while bitcoin rose 5x; buying QQQ would have produced a $25B gain. With $9B of debt, continued bitcoin declines while paying the dividend could lead to bankruptcy, and its NAV is 30-40% below the trading value. x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com
Strategy's STRC preferred was never as safe as a money market fund, and if both STRC and MSTR share dilution fail, the only way left to pay dividends is selling bitcoin. Believing STRC would stay at par forever while paying a junk-like 12% was financial illiteracy; per @betirement, it has now fallen below $90. Strategy says its bitcoin reserve gives it 32 years of dividend coverage. x.com x.com
Strategy is in the worst possible position, with Michael Saylor now down $13.7 billion, about 20%, on its bitcoin bet. STRC needs money to be rescued, and selling bitcoin to fund it would hurt both bitcoin and Strategy badly. Only a sudden sharp bitcoin rally looks able to save it. x.com
Strategy is attracting some of the world's largest fund managers because they want Bitcoin exposure. Their buying supports the bullish case for MSTR as a listed vehicle for institutional Bitcoin demand. x.com
Strategy's STRC resembles FTX backing its books with its own tokens, and big Wall Street players are likely shorting STRC knowing Saylor will eventually have to sell bitcoin to fund the debts. That would ultimately ruin MSTR holders' trust. x.com
Strategy is a disclosed Ponzi that is now unwinding, with much more downside ahead and an eventual path to zero. As bitcoin-treasury hype fades, raising money to keep the scheme going gets harder, while interest costs keep accumulating on instruments such as its STRC preferred. That liquidity drain is what will take Strategy down. x.com
Strategy offers prime risk/reward here unless Bitcoin keeps moving deeply lower. Saylor affirmed the company can pay its dividend for over two years and will prioritize always holding 12 months of dividend cash, alongside a new Digital Credit Capital Framework. Last week's FUD over Saylor, Strategy and its STRC preferred produced a strong candle below the prior low into a key demand area from the previous cycle, yet the stock kept its weekly bullish divergence. x.com
Strategy may be forced to sell bitcoin because its STRC preferred has hit a record low of $83, well under its $100 par. That discount says the dividend is too low, and raising it means more cash out the door. Strategy has funded that cash by selling MSTR shares, but the premium that made dilution easy is almost gone, leaving bitcoin sales as the remaining option. x.com
Strategy is turning to selling bitcoin to rescue its troubled STRC preferred program, which points toward bankruptcy. It launched a Bitcoin Monetization Program that lets it sell BTC to fund operations, per Watcher.Guru, and the news sent the preferred up 10%, meaning it would sell bitcoin low to support STRC high. x.com
Strategy is early below 1.5x its bitcoin net asset value, and the crowded short-Strategy, long-bitcoin trade is about to blow up, setting off short covering. Upcoming catalysts include STRC trading back at par, an Iran resolution with no rate hikes, and a momentum rotation into crypto after its underperformance relative to overpriced and crowded AI and software stocks. x.com
Strategy's funding machine is breaking as its STRC preferred trades far below $100 par, threatening a death spiral. STRC pays about 11.5% and lets Strategy buy bitcoin only while near par; at a new low of about $82, issuance stops, yet cash dividends are still due. Cash has fallen from $2.25 billion to about $1 billion, and Strategy sold 32 BTC in late May to cover STRC obligations. Higher payouts mean more bitcoin sales, which hit bitcoin's price and confidence, pushing STRC lower again. x.com
