The Secret to BTC's Rise: MSTR's New Flywheel——STRC

Author: CJ_Blockchain

Bitcoin (BTC) has maintained absolute strength in a macro volatile market, and active trading of STRC may be one of the reasons for its resilience.

Last week, MSTR’s preferred stock STRC had an average daily trading volume exceeding $300 million, with a single-day high reaching $750 million. It has almost become the most liquid preferred stock in the US stock market.

According to STRC’s mechanism, last week’s trading volume could have generated a potential net buy of about $700 million for BTC.

This article aims to introduce the basic information about STRC, its operational mechanism, why it can bring buying pressure to BTC, and the potential risks involved.

1. What is STRC Preferred Stock?

From a financial architecture perspective, STRC is a debt-like equity instrument issued to external investors. It uses layering to decompose Bitcoin’s sharp volatility into credit products with fixed cash flow characteristics.

Four core features of STRC:

• Short-term high-yield credit: Positioned as a short-term high-yield instrument, offering competitive monthly dividends (current annualized rate of 11.5%).

• Perpetual structure: No fixed maturity date; the company does not bear the “principal repayment” pressure typical of traditional bonds, making it a permanent capital.

• Capital structure priority: Superior to common stock ($MSTR) in liquidation hierarchy, providing a safety cushion for debt-oriented investors.

• No default risk: Legally classified as equity (Equity); dividend payments are non-mandatory, avoiding bankruptcy default triggered by temporary cash flow shortages.

Comparison between MSTR and STRC

2. Price Anchoring Mechanism: STRC’s Anchoring and Liquidity Absorption

Strategy uses a series of financial leverage techniques to keep STRC’s market price around $100, establishing a stable financing window.

Key price control tools:

• Dynamic dividend adjustment: Strategy employs a reflective interest rate adjustment. If STRC’s price falls below $99, the company raises dividends (by 25-50 bps) to stimulate buying; conversely, it lowers interest rates to suppress excessive demand, restoring market equilibrium.

• ATM (At-the-Market) issuance: When STRC’s price exceeds $100, Strategy issues and sells new STRC at $100 to absorb surplus demand, converting excess funds into BTC purchasing power.

• Redemption clause: The company reserves the right to redeem STRC at $101. This clause psychologically and financially limits investors’ premium buying motivation, ensuring the price stays close to face value.

• Tax efficiency optimization: STRC dividends are treated as “return of capital,” allowing holders to enjoy tax deferral benefits. This design reduces investors’ selling frequency and stabilizes the $100 anchor price.

Strategy aims to keep STRC’s price within a narrow range of 99–100 USD, using this as a foundation for large-scale conversion into Bitcoin purchasing power.

3. Structured BTC Appreciation Flywheel: From Trading Volume to Purchasing Power

When STRC’s price fluctuates between 99-101, the conversion into BTC purchasing power works as follows:

• Issuance of STRC to meet excess demand: When STRC’s price hits $100 (par), the company issues and sells new STRC via the ATM plan to meet “excess demand” beyond current market value. For example, if daily trading volume at $100 is $100 million, and 30% of that is new issuance, the company sells $30 million worth of STRC and immediately uses the proceeds to buy $30 million of BTC.

• Balancing leverage: Increasing STRC issuance effectively adds debt to the company. Currently, MSTR’s leverage target is about 33%, meaning each additional $1 of debt requires adding $3 of BTC to the treasury. So, with the $30 million debt increase, the company also needs to acquire an additional $60 million of BTC.

• Filling the gap with common stock MSTR: To obtain the extra $60 million of BTC and maintain leverage stability, the company issues and sells $60 million of new MSTR shares via ATM, then uses the proceeds to buy $60 million of BTC.

Conclusion: For every $1 of STRC issued, roughly $3 of BTC is added to the treasury. Therefore, a daily trading volume of $100 million in STRC at par could generate about $30 million in new STRC, ultimately leading to the company purchasing up to $90 million of BTC.

The key factor here is the duration and volume of STRC trading above $100 during the week—assuming about 30% for simplicity. Actual results depend on next week’s MSTR announcements.

This flywheel mechanism is not sustainable forever; three core constraints exist:

• STRC must reach $100: MSTR only sells STRC at $100. If STRC stays strictly below $100, no new issuance occurs, and no new BTC purchasing power is generated.

• MSTR’s mNAV must be above 1x: The long-term goal is to increase the Bitcoin ratio per share. Only when mNAV exceeds 1x can selling MSTR shares to buy BTC increase BPS; if mNAV drops below 1, selling MSTR for BTC causes dilution, and ATM use is avoided. If demand for STRC is high but mNAV is below 1, the company can only suppress excess demand by lowering dividend yields.

• Long-term BTC price performance (the fundamental risk): The entire strategy relies on the long-term appreciation of BTC (e.g., annual returns over 20%). If BTC enters a prolonged bear market, STRC may trade below par persistently, and MSTR’s mNAV could fall below 1, cutting off the ability to issue dividends via common stock. In such extreme cases, Strategy can only rely on its existing USD reserves (currently about 28 months’ worth) to pay dividends; if reserves are exhausted, the company will be forced to gradually sell its BTC holdings.

4. Conclusion

Saylor emphasized last year that Strategy is not just a simple “DAT” company but a structured financial firm backed by Bitcoin. He is not just a believer in BTC but a financial genius.

Every time BTC dips, Strategy and Saylor himself face the most scrutiny. Some worry about a potential collapse of Strategy; others worry that its large BTC holdings could impact decentralization.

But Saylor doesn’t care. His only goal is to buy as much BTC as possible.