Ten Thousand Words Decoding STRC: Strategy's New Magic Trick to Make Money and Buy Coins

This article is from:Viktor

Compiled | Odaily Planet Daily (@OdailyChina); Translator | Azuma (@azuma_eth)

Over the past two weeks, we have seen a significant increase in the trading volume of STRC, and the product's popularity on social media such as X has also been rising. Therefore, I believe now is a good time to write an article about Strategy and its new structure. This is the fourth article I have written about Strategy and the Bitcoin treasury model:

• The first article was an introduction to the Strategy play, in which I clarified some common misconceptions about the model.
• The second article explained the "Full-Stack Treasury Company" model and the mechanisms that support its NAV premium.
• The third article introduced the preferred share play, a new model launched by Strategy in 2025, which is currently the company's main strategy.

In this article, we will focus on STRC. It has now become MSTR's most important preferred share product and is also the core focus of Michael Saylor (founder of Strategy) and his management team.

TL;DR

1. STRC is an income-generating instrument backed by Strategy's Bitcoin treasury, with a dynamically adjusted dividend rate to keep the price close to par value ($100). Currently, you can earn an 11.5% annualized yield (paid monthly) on a relatively stable and transparent risk instrument.
2. STRC is essentially a way for Strategy to convert yield demand into structural buying pressure. As long as Strategy runs both the STRC and MSTR ATM issuance mechanisms (and mNAV > 1), this structure can scale massively without increasing MSTR's leverage level. This means Strategy can absorb hundreds of billions of dollars (or more) in new demand for STRC while maintaining leverage at about 33% and keeping credit risk unchanged.
3. By using the common stock ATM mechanism to maintain leverage, roughly $3 of BTC is added to the treasury for every $1 of STRC issued. Based on rough estimates, when STRC's daily trading volume near par ($100) is $100 million, it may lead to $100 million to $150 million in BTC purchases.
4. Strategy essentially splits BTC exposure into two different risk tranches: STRC holders get relatively stable, low-volatility income, while MSTR shareholders bear the remaining upside and volatility of BTC. As Lavoisier said: "Nothing is created, nothing is destroyed, everything is transformed."
5. The design goal of the entire structure is to increase the Bitcoin-per-share over time. This will ultimately benefit MSTR common shareholders, as it means MSTR should theoretically mechanically outperform BTC.
6. A short-term pullback of 5%–10% in STRC is possible, but as long as market confidence in this structure remains, the market will usually pull the price back near par through arbitrage trading.
7. The real risk is not a sudden crash, but a long-term bear market in BTC, which could gradually put pressure on the entire structure over time. Even in the (extremely unlikely) worst-case scenario, due to the dollar reserve and Strategy's flexibility in adjusting dividend rates, the process would be very slow.
8. If Strategy eventually collapses, it likely won't happen in a dramatic and theatrical way like Luna/UST, but rather as a slow and long-term deterioration.
9. If you are bullish on BTC but bearish on MSTR and STRC, it is logically difficult to justify. Given Strategy's current risk level (which may change in the future), it is almost impossible for Strategy to die before BTC does.

What is STRC and how does it work?

First, let me briefly review the concept of preferred shares: simply put, they are debt-like financial instruments but legally still equity of the company. This means these preferred shares never need to be "repaid," and Strategy cannot default on them.

In the capital structure, preferred shares rank above common shares MSTR for claims, meaning in the event of company bankruptcy, preferred shareholders are paid before common shareholders.

So far, Strategy has issued five preferred shares (STRF, STRC, STRK, STRE, STRD), which I introduced in my previous article. Here are the main features of STRC (also known as Stretch):

• It falls into the "short-duration high-yield credit" category.
• Strategy's goal is to keep STRC's price as close to $100 (the "par value") as possible, ideally within a 1% range of $99–$100.
• STRC pays floating dividends monthly; the current dividend rate is 11.5%.
• If STRC trades significantly below par, Strategy can increase the monthly dividend rate to make the product more attractive, increasing demand until the price returns close to par.
• If STRC's price is above $100, Saylor can issue and sell new STRC shares at $100 through the ATM (at-the-market) offering program. This effectively creates a price cap near $100.
• If Saylor does not wish to issue shares via ATM, the company has another option—redeem STRC at $101, meaning market participants have little incentive to buy STRC above this price.
• Like Strategy's other preferred shares, STRC is a perpetual preferred stock, meaning it has no maturity date and no repayment deadline.

Odaily Note: All data for STRC can be found on Strategy.com. The screenshot below is from March 13, 2026, which was the ex-dividend date, so STRC's price was below par.

How does Strategy use ATM to control leverage?

Although Strategy's preferred shares are not legally debt, they can be seen as a way to introduce leverage to the balance sheet. Strategy distinguishes between leverage ratio and amplification ratio—the leverage ratio only calculates the "convertible debt / BTC reserve" ratio; the amplification ratio calculates the "convertible debt + preferred shares / BTC reserve" ratio.

In fact, the amplification ratio is the true measure of Strategy's leverage level. This means that whenever Saylor issues and sells new STRC, Strategy's leverage level increases. If Saylor wants to reduce the company's leverage, the tool he can use is the common stock ATM issuance mechanism—by issuing new MSTR shares and using the proceeds to buy BTC, he can expand the company's scale while reducing the leverage ratio.

This logic is easy to understand: Suppose a company holds $10 billion in BTC, has $3 billion in debt, and a market cap of $12 billion. Its leverage ratio is: $3 billion debt / $10 billion BTC = 30%.

Suppose the company issues an additional $2 billion in new shares and uses the money to buy $2 billion in BTC. Assuming the BTC price remains unchanged, the company's market cap becomes $14 billion, the BTC treasury value becomes $12 billion, but the nominal amount of debt has not changed, so the new leverage ratio is: $3 billion debt / $12 billion BTC = 25%.

From this example, it is clear that through the common stock ATM issuance, the company can both expand its scale (market cap from $12B → $14B) and reduce leverage (30% → 25%).

Is Strategy using STRC to buy coins on a large scale?

How STRC demand translates into BTC buying pressure

As I said before, Saylor will only sell STRC at $100, not below $100.

This means that when the price is below $100, all trading volume is just STRC shares changing hands between past, present, and new holders. When the price reaches $100, part of the volume still corresponds to ordinary STRC share trading (because some are willing to sell at $100), but the remaining volume corresponds to Saylor issuing new shares and selling them to "excess demand" at $100.

Last week, the ratio of STRC's weekly trading volume to the weekly ATM size was about 40%. I will use this number in the example below, but it is clearly not a fixed rule; in some cases, it could be 25% or 60%.

When STRC trades near par and the daily volume is $100 million, the situation is roughly this—Saylor can issue 40% of that amount through the STRC ATM program, i.e., issue and sell $40 million in brand new STRC shares. He will immediately use this $40 million to buy BTC.

Odaily Note: The ATM activates and runs when the STRC price reaches $100.

However, selling STRC increases the company's leverage (it is a debt-like instrument), and Saylor certainly wants to keep leverage stable. Strategy's current leverage is about 33%, and I think he wants to keep it around that level. This means that for every $1 of new debt added, $3 of BTC reserves must be added. In the previous example, if Saylor adds $40 million in "debt" through STRC and buys $40 million in BTC, he still needs to add another $80 million in BTC to the company's reserves. How can he do this?

The answer was explained in the previous section—using the common stock MSTR ATM issuance mechanism. Therefore, Saylor will issue and sell $80 million in new MSTR shares and immediately use the proceeds to buy $80 million in BTC.

So the conclusion is, according to this rough calculation, a daily STRC volume of $100 million roughly corresponds to $40 million in new STRC issuance and the purchase of about $120 million in BTC. With STRC, Strategy has found a way to convert the demand for stable yield into BTC buying power.

What if STRC demand explodes? Will Saylor be forced to max out leverage?

I also want you to notice another point: according to the model I just described, Strategy could completely triple the market cap of STRC (in other words, add about $8 billion in STRC debt on top of the current $4 billion market cap) without increasing the company's leverage ratio (i.e., credit risk).

Saylor already has all the necessary tools to scale STRC to any extent the market demands, while still keeping leverage stable at 33%.

Obviously, this would increase the nominal size of the company's debt and the dividend payments required, but these metrics would grow in sync with the size of the BTC treasury, meaning Strategy would not take on any additional risk related to the BTC price.

What is the real limitation of this strategy?

The model I described above, which runs both the STRC and MSTR ATM mechanisms simultaneously, requires two conditions.

The first condition is obvious: STRC must be trading at $100. When this happens, it essentially means demand for STRC is higher than its current market cap, so Saylor issues new shares to meet the excess demand.

The second condition, which I haven't mentioned before, is that mNAV must be above 1x to use the common stock ATM mechanism. As I explained in detail in another article, Strategy's core goal is always to increase the bitcoin-per-share (bps) over the long term. When they sell MSTR shares and buy BTC while mNAV is above 1x, it is accretive from a bps perspective; the higher the mNAV, the more accretive this operation is; when mNAV is exactly 1x, the operation is neutral; but when mNAV is below 1x, using the proceeds from selling MSTR to buy BTC would be dilutive from a bps perspective, so they avoid it.

You may have noticed that in the previous section I mentioned: using the MSTR ATM mechanism can both expand the company's scale and reduce the leverage ratio. But if mNAV is above 1x, then using the common stock ATM has an additional benefit—increasing the bps ratio.

By the way, the mNAV metric is actually displayed directly on the homepage of Strategy.com. They use the most diluted mNAV as a reference, which is the correct approach. Currently, this value is about 1.2x, and I think the lowest it has been in 2026 was around 1x.

So, what if this situation occurs—due to excessive STRC demand, Saylor has to issue new STRC shares, but mNAV is below 1x? Does this mean he cannot use the MSTR ATM to maintain stable leverage and is forced to increase leverage?

First, I think this scenario is unlikely because STRC trading stably at $100 itself implies investor confidence in the overall structure, so MSTR's mNAV should theoretically be at least 1x or above. Second, this assumption ignores another tool they have to control STRC demand—lowering the dividend.

The dividend rate question: Can 11.5% be sustained?

First, let me remind you that STRC launched with a dividend rate of 9%. The dividend rate is a tool that can be adjusted to match STRC demand and ensure its price stays near par.

Strategy's current guidance is: if STRC's monthly VWAP (Volume Weighted Average Price) is between $95–$99, they will increase the dividend rate by 25 basis points (bps); if the monthly VWAP is below $95, they will increase it by 50 bps; if the monthly VWAP is above $101, they will decrease the dividend rate.

So, what they have done so far is essentially gradually increase STRC's dividend rate from 9% to 11.5% to reach an equilibrium where STRC trades around $100 in daily trading. This week has been STRC's most successful week so far, as it not only traded consistently near par but also had very large volume (about $300–400 million per day, compared to an average volume previously just over $100 million).

Odaily Note: STRC's price chart since launch.

STRC's demand fundamentally depends on several variables:

• Credit risk: What is Strategy's current leverage ratio? In other words, how much BTC is currently "backing" STRC? This depends directly on the BTC price—if BTC falls, all else being equal, leverage increases, credit risk increases, and STRC demand decreases (i.e., STRC price falls).
• Yield: What is the current dividend rate paid by STRC? The higher the dividend rate, the greater the demand for STRC.
• Awareness: How many people know about STRC? In the first few months or years after the product launch, this is a very important factor, as it is basically a variable that only goes up and, all else being equal, significantly affects STRC demand.
• Confidence: How many people, after seeing STRC trade for months and pay dividends consistently, are willing to put money into it? This is a special factor because confidence can change dramatically—if STRC trades in a narrow range near $100 for a long time, more and more people will consider it safe; but if we suddenly see a 10% drop in a day, that trust can disappear quickly.

From STRC's launch until now, what we have seen is: credit risk has increased (because BTC is down 45% from its all-time high), yield has increased, awareness has increased, and confidence has increased. One factor had a negative impact on demand, while three factors had a positive impact, and we are now finally in an "ideal" state: STRC is stable around $100.

When the BTC price was around $68,000, an 11.5% yield was the dividend level needed to pull the STRC price back to par. For a product that has been trading for less than eight months, this seems quite positive to me. Saylor expects BTC's compound annual growth rate (CAGR) over the next 20 years to be 20–30%. As I explained in detail in another article, under this assumption, it is completely reasonable to issue debt at 11.5% to buy an asset with an expected annual growth of 25%. Theoretically, you could even pay a higher interest rate and profit from the spread between the interest cost and BTC's expected annual return.

In my opinion, the most likely development path is that STRC demand will continue to grow, and Strategy will gradually lower the dividend rate back to 10% (or even lower in the long term) to control demand while reducing the company's interest cost.

What happens to STRC if everyone wants to sell?

In that case, the price of STRC would plummet! But in fact, we have seen this happen several times with this product: In August 2025, STRC fell from $98 to $92 (a 6% drop); during the market sell-off in November 2025, STRC fell from $100 to $89 (an 11% drop); and this February, it fell from $100 to $93 (a 7% drop).

It is important to note that Saylor's explicit goal is to keep STRC always in a narrow range near $100, and STRC has become the core focus of Strategy. Therefore, if STRC's average price for a month is below $99, Strategy will increase the dividend rate to bring demand back to a level that supports a $100 price. As long as market participants have confidence in Strategy's ability to maintain this mechanism, there will always be buyers on dips below $100, hoping to profit from the "arbitrage trade back to par."

In the short term, panic among holders can indeed cause the price to drop by 10%. But if you have confidence in the structure Strategy has built, the price will usually return to near par within days or weeks—as we have seen in the past.

Why won't the dividend rate rise indefinitely?

Let's assume STRC does not return to par, which means Strategy must keep increasing the dividend rate... and since the dividend rate has no formal upper limit, wouldn't this look like a "death spiral" scenario? Not exactly.

First, you need to understand that the dividend "guidance" does not legally bind Saylor to take any action. Ultimately, the company has complete discretion over the dividend rate, and they could stop increasing it even if the monthly average price is below $99.

If Strategy expects BTC to grow 20–30% per year, they likely have an acceptable "maximum dividend rate" in mind, perhaps around 15%. Once it reaches that level, they would ignore STRC's trading price and stop increasing the dividend rate.

Remember, the dividend rate can be adjusted monthly. If you expect BTC to recover after a bear market, a high dividend rate does not need to be maintained forever. As the BTC price rises again, STRC's credit risk improves, which mechanically increases demand for STRC and pushes its price back near par. At that point, Strategy can start lowering the dividend rate again. In the long run, even if the dividend rate briefly rose to 13% during a stressful period, STRC's dividend rate would likely eventually fall back to around 8%.

In the next section, I will outline a worst-case scenario: what happens if BTC enters a long-term bear market and Saylor is forced to keep increasing the dividend rate.

Understanding the risks

After reading this entire article, it might seem like nothing can go wrong, but there's no such thing as a free lunch. So, as a holder of STRC, what risks am I actually taking?

Let me state my position clearly: I think the market is currently mispricing the risk of STRC. Under reasonable bullish assumptions for the BTC price, the risk-reward ratio is quite attractive. Note that I am not saying you can get high yield with zero risk; risk does exist and is always related to BTC's performance.

I think there is a mismatch between people's expectations for BTC's future price movement and their perception of STRC's risk. Simply put, if you look at crypto-native investors' expectations for BTC over the next few years, 95% of the scenarios they envision would not materially impact STRC. In other words, within their own framework of BTC expectations, they think they can get a yield of over 10% with "low risk." But let's talk about these risks specifically.

Risk 1: Asymmetric downside risk and upside reward

STRC's structure means that if you buy at $100, your upside is capped at the annual dividend yield (currently 11.5%), while your downside could be 0–10% in a matter of days—based on historical price performance.

This means that if STRC drops 6% in a week, you have effectively temporarily lost half a year's worth of dividend income. If you need to exit the position quickly, this could be a problem.

If your goal is to hold STRC long-term, then this is less important, as long as you believe it will eventually return to $100, you can still exit the position without a discount. A reminder: STRC dividends are return-of-capital, meaning holders are not taxed on the dividends, so they don't have a strong short-term trading incentive.

Risk 2: STRC and BTC fall simultaneously

STRC's credit risk is directly related to the BTC price, so you may have noticed that STRC's pullbacks usually occur when BTC suffers a sharp sell-off. This means that your "stable, yield-generating asset allocation" is precisely losing value when you, as a crypto bull, are most vulnerable.

Odaily Note: IBIT (BlackRock Bitcoin ETF)'s biggest declines are usually accompanied by STRC declines.

Risk 3: STRC trades at a discount long-term

People's trust that STRC can return to par comes from two factors: its actual credit risk and the risk perception formed by historical price movements. And the second factor can also work in reverse: what if everyone thinks a 5% pullback will be quickly bought back, but suddenly one time it isn't?

If that happens, those who bought on the 5% dip might choose to exit their positions, causing the price to fall further and potentially triggering new emotional selling, leading to a larger decline. We can imagine a scenario where STRC falls 15% and fails to rebound for several days; the confidence built up previously could gradually erode, triggering greater selling pressure.

In this case, what can stop this vicious cycle? The answer is still the BTC price. Saylor's entire strategy is ultimately built on the expectation that BTC will achieve returns of over 20% per year for the next decade or more.

Risk 4 (Worst-case expectation): The fundamental risk always lies in BTC's performance

The worst-case scenario for STRC is the situation I just described, but with BTC unable to recover strongly in a long-term bear market. Because there are so many variables involved, it is difficult to predict exactly what would happen, but it would roughly look like this: STRC would continue to trade below par, so Saylor would increase the dividend rate every month, trying to pull the price back to $100.

At some point, the dividend rate would become so high it's no longer reasonable, so he would stop increasing it and just maintain it at a certain level. This means he would no longer follow the previous "guidance"—i.e., increasing the dividend rate when the monthly VWAP is below $99. Remember, this is just guidance; nothing forces him to follow it.

Not following this guidance would further weaken market confidence in STRC; it might continue to trade at a large discount, for example, a 40% discount and a 15% dividend rate, meaning an effective yield of about 25%.

MSTR would also trade below 1x mNAV, meaning the company cannot sell MSTR shares to help pay dividends. Strategy would rely entirely on its dollar reserve to pay dividends, and currently, their reserve is enough to cover 28 months (about 2 years and 4 months) of dividend payments. As these 28 months gradually approach their end, all related assets could face greater pressure, and BTC, MSTR, and STRC would have more reasons to continue falling.

After the dollar reserve is exhausted, Strategy would have to gradually sell BTC. The current annual dividend expense is about $1 billion; if this number rises to $2 billion, Strategy would have to sell about $200 million in BTC every month to maintain dividend payments. Alternatively, they could choose to stop paying dividends, in which case the value of the preferred shares, STRC, and MSTR would fall further, and the company would have little it could do until the BTC price recovers.

This is roughly the outline of the worst-case scenario. As you can see, Strategy's dollar reserve provides a huge buffer for a long bear market, as Strategy could theoretically do nothing and rely on the reserve to pay dividends for over two years without being forced to act.

Currently, we are in the middle of a BTC bear market, with the price around $70,000 (down about 45% from the top), but STRC is still trading near par (dividend rate 11.5%), and mNAV is 1.2x. Given that I don't think BTC will experience a two-year bear market (the 2022 bear market lasted about a year from top to bottom) and Strategy hasn't even started using its dollar reserve, I think Strategy's overall structure is quite safe and resilient at the current leverage level.

Risk 5 (Long-term concern): Strategy's model is too effective

As I said on X yesterday, as a BTC bull, the biggest risk associated with Strategy is—it might run too successfully.

"The biggest bear case for Strategy is actually that the strategy runs too successfully. If it succeeds, they will keep increasing their BTC holdings. But eventually, they will become too large and pollute BTC's originally 'pure' narrative. In fact, this is already happening."

In fact, Strategy already holds about 3.5% of the total BTC supply. This could negatively impact future BTC demand, as it may begin to weaken the narrative of BTC as a purely decentralized asset. And the narrative around STRC and its high yield as "Digital Credit" has sparked some negative reactions in the crypto community, which could also indirectly affect BTC demand.

As I explained throughout the article, the amount of BTC held by Strategy will only continue to increase. The only scenario that could prevent this is if BTC experiences at least two years of a painful cycle. Even then, it would take an even longer period of depressed markets for Strategy's BTC reserves to gradually decrease due to dividend payments.

I can understand why some people feel uneasy about Strategy's role in the BTC ecosystem. But in my opinion, if this alone is enough to make you turn bearish on BTC's long-term prospects, you probably weren't that bullish on BTC to begin with. From my perspective, this is not a particularly serious issue. True, Strategy is a single entity holding 3.5% of the BTC supply, but ultimately, Strategy and its BTC reserves belong to its shareholders.

Is it really that different from BlackRock holding a similar amount of BTC on behalf of IBIT shareholders? Of course, they are not identical; IBIT also doesn't have bankruptcy risk. But in my view, they are similar—they both represent the financialization of BTC, and this trend is itself inevitable.

I don't think Strategy and STRC pose a systemic risk to BTC, but I can understand the negative impact they might have on BTC's narrative. In any case, this article is mainly to help everyone understand STRC and Strategy's structure. After that, you can decide for yourself whether you are more bullish or bearish on it.

Is STRC the new UST?

Comparisons between STRC and Luna / UST / Anchor have been mentioned too frequently in recent social media discussions, so I think it's worth discussing specifically. In fact, the two are completely different things on many levels.

Odaily Note: LUNA's price chart before the crash.

UST was a stablecoin, so maintaining the $1 peg was critical; STRC is a preferred share, ideally it trades within a 1% range near $100, but it can completely fall a few percentage points. This has happened before, will happen again, and it's not necessarily a problem in itself.

UST was backed by LUNA, and LUNA's value depended partly on UST's success. When UST was below the peg, users could exchange UST for newly minted LUNA. This increased selling pressure on LUNA, weakening market confidence in the system and further increasing selling pressure on UST. The result was a reflexive death spiral that drove the value of UST and LUNA to near zero in a matter of days. STRC does not have this reflexive mechanism because a drop in STRC's price does not trigger forced issuance, redemption, or dilution of other assets in the system, nor does it affect BTC.

Anchor provided a yield of 18%–20% for UST, which is not only significantly higher than STRC's current yield of about 11.5% but was also largely subsidy-driven and structurally unsustainable. The source of STRC's yield is relatively simple: Strategy expects BTC's annualized return over the next decade to exceed 20%; STRC holders get the first ~11.5% (or whatever the dividend rate is at the time) with relatively low volatility, while MSTR shareholders bear the remaining upside and volatility.

We also know very clearly how Strategy can continue to pay dividends. If mNAV is above 1x, they can issue MSTR shares via ATM; if mNAV is below 1x, they can rely on the dollar reserve (currently enough to cover over two years of dividend payments). If the reserve is exhausted, they can eventually sell BTC derivatives or directly sell BTC from the treasury. In the case of UST and Anchor, it was essentially just—"bro, trust me, I'll definitely keep paying."

The way price declines affect the two systems is also completely different. When UST lost its peg, confidence collapsed quickly, and the market quickly believed the system could go to zero; for STRC, a lower price means a higher effective yield, which may attract new buyers. For example, in a completely pessimistic scenario, if STRC trades at $50 with a 12% dividend rate, its effective yield would be about 24%.

Finally, the time dynamics are completely different. Luna/UST was an extremely fragile system that could collapse within days after a loss of confidence. For STRC, even the worst-case scenario described earlier would develop much more slowly (a very slow decline), potentially taking years, unless you assume BTC catastrophically drops 90% in a few months.