Author: Chloe, ChainCatcher
Since the launch of STRC by Strategy at the end of July 2025, Bitcoin has fallen by about 40%, nearly 50%. This preferred stock, designed to "trade at around its $100 par value," is now mired in a discount: last Thursday, it hit a historic low of $82.53 intraday, and even now, closing back at only $88.59, it remains about 13% below par. As the discount widens, STRC's effective yield has been pushed to over 12.9%, approaching 13%.
Jesse Myers, Bitcoin Strategy Lead at The Smarter Web Company, has stated, "Strategy is fine," while economist Peter Schiff has once again labeled the entire structure as a "classic centralized Ponzi scheme."
Thus, those old questions have been brought back to the table: Will Strategy be forced to sell Bitcoin? Is the flywheel it relies on for expansion actually a Ponzi scheme?
Was STRC's Mechanism Designed by AI?
To discuss STRC, we must first address a detail that is easily overlooked but has resurfaced during this downturn: this structure was the product of Saylor's conversations with AI.
The controversy stems from a May CoinDesk interview clip recirculating on X. In the clip, Saylor admits to extensively using artificial intelligence while developing Strategy's preferred stock product. He said that when creating Stretch, he designed these things using AI; he couldn't have done it alone. He spent hours discussing and refining ideas back and forth with the AI.
According to him, he constantly threw various structural proposals at the AI, testing whether unconventional ideas were legally sound. When he proposed, "I want a preferred stock that pays monthly dividends and is stable at $100," the AI responded: No one has ever done this in history, but it is completely legal and completely reasonable.
Interestingly, as STRC fell below par and the market began questioning whether this mechanism could hold, many foreign media outlets simply went back to ask AI—including ChatGPT, Grok, and Claude—if STRC could return to $100.
Will Strategy Sell More Bitcoin?
Not long ago, Strategy sold 32 BTC, worth about $2.5 million, to meet its dividend obligations. This amount is negligible compared to its overall Bitcoin reserves, but it proves one thing: when the financing efficiency led by STRC declines, cash obligations can indeed force limited selling of Bitcoin.
More alarmingly, buying momentum has frozen. Strategy's pace of accumulating Bitcoin has noticeably slowed: In April this year, it spent $2.54 billion to buy 34,164 BTC in a single week; in May, it added about 24,869 BTC with $2.01 billion. But by June, weekly purchases had shrunk to around $100 million. For the week ending June 8, it bought 1,550 BTC ($101 million); for the week ending June 15, it bought 1,587 BTC ($100 million), bringing its total holdings to 846,842 BTC.
Furthermore, the widening discount not only pushes up the yield but also suspends the "at-the-market" (ATM) issuance mechanism—issuing new shares into the public market at current prices to raise cash in batches. This financing channel is a key part of sustaining the entire Bitcoin flywheel.
However, bulls do not buy into this "death spiral" narrative. Jesse Myers believes this wave of STRC selling looks more like leveraged unwinding than a deterioration in fundamentals. He estimates that if conditions remain unchanged, Strategy's current state is sufficient to pay STRC dividends for up to 32 years; and as long as Bitcoin appreciates by about 2% annually, this obligation can be covered indefinitely. Moreover, the equity issuance tool itself has not disappeared. Even if ATM issuance is temporarily paused, Strategy still retains multiple backup financing options, including restarting the issuance of MSTR common stock, using cash reserves, and only resorting to selling Bitcoin if necessary.
On the bearish side is Schiff's classic script. He argues that if Saylor raises the yield to 13%, he must sell more MSTR at a larger discount to finance it; if he doesn't raise the yield, the STRC price will continue to fall. In his view, the only way to stop this death spiral is to cancel the dividends outright, but that would immediately crush STRC, dragging down MSTR and Bitcoin along with it.
Is This Flywheel a Ponzi Scheme?
Schiff's accusation is straightforward: STRC is a "classic centralized Ponzi" because its operation depends on whether Strategy can continue to raise new funds through another round of equity issuance or simply sell Bitcoin to fulfill its obligations. Even trader DonAlt has publicly questioned why STRC's price action after falling below par "trades like a Ponzi."
Strategy has not directly responded to such accusations, only continuing to position STRC as preferred stock backed by its Bitcoin DAT strategy. A more concrete move was changing STRC's dividend payment from monthly to semi-monthly, meaning twice a month.
The core argument from the opposing side is "leveraged unwinding." Myers points out that the problem lies not with the structure itself, but with the fact that STRC traded near $99 to $100 for a long time, enticing investors to deploy heavy leverage, with many assuming the instrument would remain firmly above $95. Once the price slipped, margin calls and forced liquidations amplified and accelerated this decline.
Analyst Scott Melker offers another perspective: the discount may actually attract yield-seeking buyers. Because STRC's dividends are calculated based on the $100 liquidation preference, not the market price. With an 11.5% dividend rate, someone buying at $90 gets an effective yield of about 12.8%, and at $85, about 13.5%. The deeper the discount, the higher the effective yield, which is itself a lure.
So the question of "whether it's a Ponzi" ultimately depends on which explanation the market believes. One narrative is that this mechanism can only keep turning by constantly pulling in new money, with funds from new entrants used to pay earlier entrants—a hallmark of a Ponzi scheme. The other narrative is that the instrument itself is fine; it's just that people previously thought it was stable and heavily leveraged, and when the price slid this time, these players were forced to cut losses, amplifying the decline—a one-time washout, not a problem with the instrument itself.
Semi-Monthly Dividends Officially Take Effect; The Answer May Be Revealed by June?
Looking back at the above, since this mechanism was designed by Saylor using AI, many foreign media outlets simply threw the same question back at AI: Can STRC return to $100, and what should Strategy do to rebuild market confidence? The common answer from ChatGPT, Grok, and Claude is, "Returning to $100 comes with conditions."
ChatGPT believes a return to $100 is still possible but requires stronger market confidence, sustainable dividend coverage, and a recovery in Bitcoin's price—all three combined. It emphasizes that the quickest repair path is to make investors believe again that dividends can be maintained without relying on selling assets. If more Bitcoin sales are actually needed later, confidence may deteriorate further.
Grok is the most reserved, bluntly stating, "Maybe, but it will be extremely difficult." In its view, the market is essentially asking: Can the engine that fuels this Bitcoin-buying machine still run? It believes a sustained rally in Bitcoin would be the most effective catalyst; conversely, prolonged weakness will weigh on both STRC and MSTR.
Claude points out that preferred stocks can indeed often recover from a discount to par, but the precondition is that investors regain belief in the issuer's ability to fulfill long-term obligations. "Recovery is possible, but the market needs to see evidence that this structure can operate even in adversity, not just work effectively when Bitcoin is rising."
So, is this strategy flawed? Whether it's the bearish Schiff, the bullish Myers, or top AI models, they all point to the same decisive variable: whether Strategy can continue to meet its dividend obligations without selling Bitcoin.
The flywheel is still spinning but clearly slower: ATM issuance is paused, the Bitcoin buying speed has shrunk from tens of billions of dollars per week earlier this year to about $100 million per week in June; the sale of those 32 BTC further proves that when equity issuance falters, the door of "selling Bitcoin to pay dividends" is already open. As for whether it's a Ponzi or a one-time leveraged washout, it depends on whether STRC can climb back to par and what Strategy ultimately uses to pay dividends.
The most concrete observation point falls on June 30: on that day, STRC's shift to semi-monthly dividends officially takes effect, but the real focus is on the rule that automatically adjusts the dividend rate based on price—suggesting a rate hike if the monthly average is below $95, and stopping only when it reaches above $99. Currently, it is deeply mired below $95, almost guaranteeing another rate hike. The dividend rate has already climbed from 9% in August 2025 to 11.5%.
This is the core of Schiff's death spiral: the lower the price, the more the mechanism automatically pushes the dividend rate higher, the larger the cash bill becomes, and ultimately, it can only be filled by issuing more shares or selling more Bitcoin. Whether this mechanism is a "stabilizer" or an "accelerator," the answer lies hidden in the price and interest rates to come.
