Author:Kaleo(@CryptoKaleo)
Compiled by:AididiaoJP,Foresight News
In the fall of 2022, FTX was the king of the industry. That summer, it had stepped in multiple times to rescue troubled competitors and was seen as the industry's savior. SBF was hailed as an altruistic genius, the face of cryptocurrency. Yet, in just a few days, everything changed. His empire collapsed instantly. Those bold investments were actually propped up using exchange customer funds. He operated FTX like a bank but lacked the proper licenses. If it hadn't been for that bank run, he likely would have gotten away with it.
"FTX is insolvent." "Withdraw your money now, or you'll never see it again." "It's all over." Ironically, the people saying these things were largely correct—but precisely because people believed them, they caused the very insolvency they predicted. They manufactured the reality of insolvency with their own hands. Those illiquid assets SBF invested in during the bear market should have grown to be worth hundreds of billions of dollars today if not for the run. Here are just a few examples: Anthropic: $75B (150x), SpaceX: $15B (75x), Robinhood: $5B (10x), Solana: $5B (10x), Cursor: $3B (15,000x).
The result? Bankruptcy lawyers liquidated these assets at severely undervalued prices. From an investment perspective, SBF was an excellent investor. But he was too greedy and felt invincible. He thought only an impossibly extreme disaster could bring him down, and then that disaster actually happened. Despite the immense pain at the time, and looking back at how successful those investments should have been—most people still consider FTX's collapse a good thing. Because everyone understands that if FTX had continued operating that way on an even larger scale, the consequences would have been far worse.
This brings us to today. Strategy (MicroStrategy) is the Bitcoin king. They have bought tens of billions of dollars worth of Bitcoin, holding 4.2% of the circulating supply. Saylor is an industry leader with a cult of personality. His famous mantra has always been "never sell Bitcoin." At least until recently, when he amended it to "buy Bitcoin faster than you sell it."
Most of Strategy's buying power has come from issuing common stock at the market (ATM) and convertible bonds. This mechanism worked because the stock traded at a premium to its Bitcoin Net Asset Value (NAV): for every $1 of stock sold, they could buy $1 of Bitcoin, but it was only backed by about $0.40 worth of actual Bitcoin; the rest was pure premium. Early borrowings were almost entirely structured as convertible bonds, precisely so the debt would eventually convert to equity naturally. The key premise: the stock must maintain a high premium. If MSTR's stock price falls below the conversion price of these bonds, holders won't convert, and the company will have to repay the principal in cash—then it would have to issue more stock, issue more debt, or, in an extreme case, sell Bitcoin.
In July 2025, things began to change. Strategy launched five perpetual preferred stock issues (IPOs), with tickers including STRK, STRF, STRD, and most notably, STRC. These preferred stocks pay fixed/floating dividends, allowing the company to raise funds without directly diluting common stock. At least, that was the public explanation. In 2025, Strategy also issued billions in 0% coupon convertible senior notes (due 2030). By 2026, the financing structure shifted from common stock to preferred stock and debt, driven by a significant compression of the stock's premium to Bitcoin. But preferred stock dividends must be funded. If the stock premium continues to compress, that debt will eventually need to be repaid (it's not urgent yet, but it will be soon).
First, where do the yields for STRC and other preferred stocks actually come from? I heard a phrase after the LUNA/UST crash that has stuck with me: "If you don't know where the yield is coming from, you are the yield." Strategy needs to pay approximately $1.7 billion in annual interest and dividends, almost entirely from preferred stock dividends. Their current cash reserves are only $870 million, enough for about 6 months. A few weeks ago they had $2.2 billion in cash, but they just used $1.38 billion to repurchase $1.5 billion in convertible bonds...
Sounds good? They cleared future debt early at an 8% discount and reduced leverage! But the problem is: this was Strategy's first large-scale use of cash to repurchase convertible bonds. Previously, all reductions in convertible bonds happened through conversion or refinancing, with no major cash outflow. Why is this important? Because the previous mechanism of "convertible bonds naturally converting to equity over time" is breaking down as the stock's premium to NAV compresses. The "excess cash" that could have been used to pay dividends is now turning into new debt pressure.
The consequence? If MSTR's stock price remains below the conversion prices of these notes, cash repayment pressure will build rapidly: about $1B in 2027, about $4.9B in 2028, about $800M in 2029. Most conversion prices are far above the current MSTR stock price (lowest $149, next $183, and higher thereafter). While some debt might be negotiated down or refinanced like recently, the debt is real and can't be easily dissolved as before.
Annualizing these debt obligations from now until the end of 2028, plus the $1.7B in preferred stock dividends, results in total annual obligations exceeding $4 billion. Over the next 30 months, Strategy will need to raise an average of $338 million in cash per month. Current cash will last less than 3 months. Of course, the debt isn't due today, but every month they delay increases the pressure on the remaining months.
What are their options? The lower Bitcoin's price falls, the less confidence investors have in Strategy's ability to keep paying STRC and other preferred stock dividends. They could defer dividend payments, but this only accumulates obligations and further destroys confidence. Their recent vote to continue paying dividends has already signaled the priority. The result: the $100 reference price and liquidation preference of STRC are showing cracks. Last week, STRC dropped to $91. If STRC trades at a sustained, significant discount, it loses its financing function entirely—no one will pay $100 for something worth $70.
The remaining two options both dilute MSTR common shareholders: sell Bitcoin, or continue issuing MSTR stock. Saylor said on the Q1 2026 earnings call that an mNAV (market NAV multiple) of 1.22x is the tipping point: above it, selling stock to buy Bitcoin is accretive; below it, selling Bitcoin becomes more sensible. MSTR's stock price has also weakened recently, making equity issuance much less attractive—but they've already proven willing to do it (they did in December 2025). The difference is, now selling stock might be to pay STRC dividends or service debt, not to buy more Bitcoin. Each sale further dilutes the Bitcoin-per-share (sats/share) for common shareholders.
The other option is selling Bitcoin. Saylor once promised to "never sell Bitcoin," but selling 32 BTC in late May broke that promise. While a small amount, the symbolic significance is huge. What happens when an entity holding 4% of the global Bitcoin supply starts showing signs of financial stress? It gets hunted by the market—at least by fear. Just like during the FTX run, everyone wants to get out first; no one wants to be left holding the bag. Once panic sets in, it happens very quickly.
A clarification is needed: Strategy's debt is unsecured, and Bitcoin is not pledged, so no one can force them to sell. But to save the entire flywheel, they may have no other choice. The ultimate question is: who wants to hold STRC if you don't believe you'll actually get that high dividend and the $100 liquidation preference? Who wants to hold MSTR if you think its only financing option is extreme dilution of common stock? Who wants to refinance a company whose multi-tool mechanism is failing? Who wants to hold a large position in Bitcoin from a "problem company" holding 4% of the total supply while Bitcoin price is under pressure, waiting for it to clean up its mess?
The biggest difference between Saylor and SBF is this: everything Saylor has done is completely legal. SBF used other people's money for diversified, illiquid investments (which later performed extremely well), but he had no right to do so, and FTX itself generated billions in real annual revenue. Saylor uses other people's money to keep hitting the buy button on a single asset, but he has the right to do so, though his company itself doesn't generate significant real revenue. But legality doesn't mean the structural risk is any smaller. The greed driving the system's fragility, once fully unleashed, could be just as devastating, if not more so, than FTX.
Currently, the most realistic path out of this predicament seems to be praying for a significant rise in Bitcoin's price to restart the premium flywheel. But if the flywheel starts again, it will only become larger and more complex, and if it breaks again, the consequences will be even more severe. So, with the FTX/SBF lens, ask yourself: is it better to clean up this mess now, or let it explode when it's much larger and more widespread?
I am personally very bullish on Bitcoin, but I'd rather take the pain now. If you're also bullish on Bitcoin, just buy more Bitcoin directly.
