Author: Chain Research Society

As of June 3, 2026, Strategy/MSTR held 843,706 bitcoins (market capitalization of approximately $53.1 billion), while also carrying $6.7 billion in convertible bonds and $15.5 billion in perpetual preferred stock, with an annualized interest payment obligation of approximately $1.712 billion. Of this, the size of the STRC preferred stock alone is a staggering $10.5 billion, with an annualized dividend payout of approximately $1.2 billion, while the company's software business only generates about $500 million in annual revenue, meaning the interest alone has essentially drained the company's resources.

First, not selling the golden body has ruined the merit.

Between May 26 and 31, 2026, MicroStrategy sold 32 bitcoins at an average price of $77,135 each, for a total of approximately $2.5 million. This transaction represented only 0.004% of its total holdings of 843,738 bitcoins, and the market began pricing in the risk of MicroStrategy's cash flow collapse.

Following the news, Bitcoin fell below $70,000 within 24 hours, currently trading at $63,000. MSTR's stock price has dropped 17% in the past two days. On Polymarket, the probability that MicroStrategy will sell more Bitcoin by the end of 2026 has surged to approximately 90%. With its cash flow running out, MicroStrategy will have to sell coins to pay interest.

$2.5 million is negligible for a company with a market capitalization of $44 billion. But Michael Thaler's three-year-long promise not to sell his cryptocurrency has been broken.

Thaler had already foreshadowed this during the Q1 earnings call on May 5th. His exact words were: "We may sell some Bitcoin to pay dividends, to desensitize the market and send a signal that we actually are." CEO Phong Le's statement was even more direct: the company will sell Bitcoin when it's in its best interest, and won't just sit there saying "never."

This statement indicates that MicroStrategy's own financial situation is already in a precarious state.

II. The full picture of debt: How much money does MicroStrategy actually owe?

MicroStrategy's capital structure can be simplified to three layers: the bottom layer is a reserve of 843,706 Bitcoins (asset side); the middle layer is convertible bonds (traditional debt); and the top layer is perpetual preferred stock (new financing layer).

2.1 Convertible bond structure: a low-interest debt matrix of 8.2 billion to 6.7 billion.

MicroStrategy accumulated approximately $4.26 billion in convertible bonds before 2024 (as of Q3 2024), then issued another $3 billion in 0% convertible bonds maturing in 2029 in November 2024, and another $2 billion in 0% convertible bonds maturing in 2030 in Q1 2026. At its peak, the total size of its convertible bonds was approximately $9.26 billion.

On May 15, 2026 , MicroStrategy used approximately $1.38 billion in cash to repurchase $1.5 billion in face value of 0% convertible bonds maturing in 2029 at an 8% discount. After the repurchase, the total convertible bond size decreased to approximately $6.754 billion (Source: strategy.com Dashboard).

The details of each batch of convertible bonds are as follows:

These convertible bonds share several common characteristics: they are all unsecured senior debt , and Bitcoin has never been used as collateral; the coupon rate is extremely low, with a weighted average of only 0.42%; holders have conversion rights (which can be converted into MSTR common stock at a predetermined price), and MicroStrategy has the option of settlement method (cash/stock/portfolio); most batches have a holder put option, which is a way to deflate bubbles, as will be mentioned later.

It's the safest layer in the entire debt system —not for creditors, but for the micro-strategy itself. The extremely low interest costs mean only about $34.6 million in interest is paid annually, but the actual principal repayment pressure is spread across the 2027-2032 timeline, with a $1 billion repayment due in February 2027.

2.2 Perpetual Preferred Stock: $15.5 billion in perpetual loans

Starting in January 2025, MicroStrategy embarked on a completely new financing path—perpetual preferred stock. As of June 3, 2026, the total size of preferred stock had reached a staggering $15.482 billion (source: strategy.com Dashboard), 2.3 times the size of convertible bonds.

There are currently five publicly traded preferred stock series:

Of the five types of preferred stock, STRC is not only the largest in scale, but also the core of the contradiction in the entire debt system .

2.3 Annualized Interest Payment Data

MicroStrategy's software business generates only about $500 million in annual revenue, while the annual dividend from a single preferred stock of STRC is close to $1 billion, which will eat up all of MicroStrategy's cash flow. This is why they had to sell their tokens.

III. STRC: How will the $8.5 billion perpetual loan work?

3.1 Product Design Logic

STRC stands for Series A Perpetual Stretch Preferred Stock. It went public in July 2025, raising $2.521 billion in its IPO, with an initial monthly dividend yield of 9%. Thaler calls it the company's "iPhone moment," highlighting its core selling point as allowing the company to massively expand its holdings without selling a single Bitcoin.

STRC's legal status is that of perpetual preferred stock , not bonds. This means:

• No maturity date : Investors can never demand repayment of their principal from MicroStrategies. STRC has no principal repayment pressure.

• No mandatory redemption clause : The company reserves the right to enforce redemption at $101, but this is an option, not an obligation.

• Dividends are not guaranteed : If the company decides to suspend dividend payments, the dividend blocking clause will simultaneously freeze the distribution to all subordinated shares (including MSTR common stock) until the STRC makes up the outstanding interest.

• Not using Bitcoin as collateral : The official statement clearly states that STRC and other preferred shares are not secured by the company's Bitcoin holdings, but only have priority claims on the remaining assets.

In short: those who buy STRC and entrust their money to MicroStrategy will never get their principal back. They can only exit by selling on the secondary market or by redeeming their shares at $101 per share when the company chooses to redeem them. MicroStrategy essentially uses money raised from retail and institutional investors that doesn't require repayment of principal to buy more Bitcoin and pay off maturing debts.

Currently, the face value of the STRC is only $94, a level it also reached in February of this year.

The buyers of STRC are not crypto-native Bitcoin believers, but fixed-income investors seeking stable, high-yield returns. Their target is not spot BTC, but high-yield bonds. Those who buy it want the 11.5% monthly cash flow, not the price increase of BTC.

3.2 Three-legged circulation

STRC operates without relying on operating cash flow, instead operating in a cyclical manner where one foot steps on the other:

First step : New investors purchase STRC, and the raised funds flow into the MicroStrategy account.

The second leg : the funds are divided in two, with the majority used to buy Bitcoin (increasing BTC reserves) and a small portion going into the US dollar reserves (USD Reserve).

The third leg : Dollar reserves pay monthly STRC dividends; Bitcoin reserves appreciate in value on the secondary market.

As long as this cycle keeps running, the micro-strategy doesn't need to sell a single Bitcoin from its holdings to pay interest.

3.3 2.3% critical value

During the earnings call, Thaler provided a key threshold calculation: as long as Bitcoin's annualized appreciation rate reaches 2.3% , the annual dollar value growth of BTC positions will be greater than or equal to the total annual obligation of $1.5 billion.

Recalculated based on data from June 3, 2026: 843,706 BTC × $63,409 × 2.3% ≈ $1.23 billion, lower than the current annualized obligation of $1.712 billion. At the current price level, the annualized appreciation rate of BTC would need to be higher to cover the entire obligation . Considering the price drop from approximately $81,000 in March to approximately $63,000 in June (a 22% decrease), the debt burden becomes self-evident.

3.4 Timeline from Interest Rate Hike to Coin Selling Statement

Arranging the timeline of STRC from its listing to the announcement of the sale reveals a clear chain of signals:

• July 2025 : STRC goes public with an initial dividend of 9%.

• December 2025 : MicroStrategy quietly established a $1.44 billion reserve (in preparation for the "stagnation of STRC share issuance").

• March 2026 : STRC dividend yield increased from 9% to 11.5% (a signal of demand for higher dividend yields in the secondary market).

• April 17, 2026 : Dividends will be paid out semi-monthly (to reduce volatility on the ex-dividend date).

• May 5, 2026 : Thaler officially acknowledges the possibility of selling BTC to pay dividends.

In nine months, STRC went from an iPhone moment to a dividend burden.

IV. Four Debt Exit Mechanisms in Microstrategies

Microstrategy's debt game leverages the high premium of MSTR's stock price and its preferred stock financing capabilities to resolve debt principal and interest. The Thaler team manages these debts primarily through the following four methods.

4.1 Path 1: Debt-to-equity swap (the most crucial exit mechanism)

This is the underlying term of all MicroStrategy convertible bonds. According to the contract, when the debt matures or the holder triggers conversion, MicroStrategy has the option to choose the settlement method, which can be repaid in full cash, in full MSTR common stock, or a combination of cash and stock.

In practice, as long as MSTR's stock price is higher than the conversion price set at the time of bond issuance, creditors usually choose to convert the bonds into shares (because the profit from selling the shares after conversion is higher than receiving cash). This means that as long as the market remains optimistic, these debts will ultimately not need to be repaid in cash; they will be absorbed by the stock liquidity in the secondary market, at the cost of moderately diluting existing equity. This is also why MicroStrategy's convertible bonds were snapped up previously.

4.2 Path Two: Cash Discounted Buyback (Deflating the Bubble)

When bonds are traded at a discount in the secondary market, MicroStrategy will directly buy out the debt with cash in advance.

Recent Case (May 15, 2026) : MicroStrategy used approximately $1.38 billion in cash to directly repurchase $1.5 billion in face value of 0% convertible bonds maturing in 2029 at an 8% discount. The conversion price of these bonds was $672.40 per share, while MSTR's stock price at the time was far below this, rendering the conversion option virtually worthless and causing the bond's market value to fall to $88.93 face value. MicroStrategy's repurchase at a price slightly above the market value not only alleviated future debt repayment pressure but also directly generated a book profit.

To support this operation, MicroStrategy has set up a dedicated dollar reserve to manage liquidity. This reserve was established at $1.44 billion in December 2025, peaked at approximately $2.21 billion at the end of Q1, and then plummeted to approximately $900 million after repurchases in May (Dashboard data as of June 3 shows $900 million).

4.3 Path Three: Refinancing and Debt Replacement

During periods of low interest rates, MicroStrategy issues new bonds with larger issuance sizes and longer maturities to redeem older bonds that are about to mature or have restricted terms.

Classic Case (September 2024) : MicroStrategy issued $1.01 billion in convertible bonds due in 2028 (coupon rate 0.625%), and immediately redeemed $500 million in senior secured notes. This move of refinancing existing debt had two effects: first, it extended the duration (pushing the maturity date forward); second, and most importantly, it released 69,080 bitcoins that were pledged against the old bonds , making all bitcoins unsecured high-quality assets again.

4.4 Path Four: Transfer to Perpetual Preferred Stock (ATM Issuance)

This is the most significant strategic shift for MicroStrategy in 2025-2026. To avoid the risk of concentrated redemption at maturity due to convertible bonds, MicroStrategy aggressively issued two types of products to the market last year through the ATM plan: MSTR (Digital Equity) and STRC (Digital Credit/Preferred Stock).

The core advantage of perpetual preferred shares like STRCs is that they have no maturity date and no pressure to repay principal. Micro-strategies are essentially using money raised from retail and institutional investors that doesn't require principal repayment to repay traditional debts with clear maturity dates, but this requires high interest rates.

Since 2026, STRC's preferred stock alone has raised approximately $5.58 billion through ATMs, bringing the total to approximately $8.5 billion. A significant portion of these funds has been used to purchase Bitcoin and replenish dollar reserves.

V. Why does the micro-strategy trigger interest payment upon selling tokens?

5.1 Triggering Chain

STRC has set up the alternative option of paying interest on the sale of tokens. The complete trigger chain is as follows:

STRC issuance stalled → Dollar reserves depleted → Obligation to sell BTC to meet redemption targets before reserves reach rock bottom

In its daily operations, MicroStrategy pays approximately $125 million in dividends and interest each month (equivalent to an annual obligation of $1.5-1.7 billion). This money comes from two sources:

• 1. Funds raised from newly issued STRCs. When investors purchase STRCs, a portion of the funds goes directly into the operating account, sufficient to cover monthly dividends. This is the standard procedure.

• 2. US$2.25 billion in US dollar reserves. When the pace of STRC issuance slows down and monthly fundraising falls short of monthly obligations, the difference is made up from reserves.

Dividing the current $900 million in reserves by the $125 million monthly obligation provides approximately 7.2 months of coverage. This reflects the current situation after management previously stated that the 18-month coverage capacity has been compressed, with the $1.4 billion buyback in May directly consuming a large portion of the reserves.

5.2 How many coins should I sell?

If STRC cannot be sold at all, dollar reserves are exhausted, and the price of BTC stops rising, how much of the 843,706 BTC position would MicroStrategy need to sell to cover its annual obligations?

Calculation formula: Annual interest payment in USD ÷ BTC price = Quantity to be sold

Based on the annual obligation of $1.712 billion and the current BTC price of $63,409, approximately 27,000 BTC need to be sold annually , which is about 3.2% of the total position.

If BTC rebounds to $81,000 (early May level), the annual required selling volume will drop to approximately 21,100 coins (2.5% of total holdings).

Based on $63,409, without considering the appreciation of BTC, the entire position can be sustained for approximately 31 years . This is the origin of the figure of 31.2 years for BTC dividend coverage on strategy.com Dashboard.

5.3 Why Desensitize the Market?

Thaler's statement on the May 5th conference call about desensitizing the market was not a casual remark. His recent strategy was to sell 32 tokens (0.004% of his total position) to show the market that the market hadn't collapsed, thus reducing panic if further sales were needed. The result? A massive crash!

CEO Phong Le described the purpose of selling tokens as strengthening the balance sheet and increasing the BTC content per share. MicroStrategy's move means that selling tokens has been redefined from a crisis-time safety net tool to a regular operating tool.

VI. Explosive Scenario: Will MicroStrategy Collapse?

6.1 Ponzi scheme?

Peter Schiff, a well-known Wall Street short seller, has repeatedly stated publicly that MicroStrategy is a classic centralized Ponzi scheme, and that STRC is an unsustainable fraud, predicting that the company will soon go bankrupt.

Conclusion : The claim of a Ponzi scheme lacks data support. However, it should also be noted that MicroStrategy is not a value investment . It is a leveraged Bitcoin exposure instrument with a premium; mNAV 1.23 means the stock price is trading at a 23% premium to Bitcoin's net asset value, not at a price below its intrinsic value.

6.2 Ranking of actual risks (from highest to lowest)

⚠️Risk 1: mNAV premium disappears → Financing capacity dries up

This is the most fatal risk of micro-strategies; currently, it is already very difficult for micro-strategies to raise funds without collateralizing Bitcoin.

The core financing logic of MicroStrategy is to arbitrage by issuing stock/preferred stock, taking advantage of the premium of MSTR's share price over BTC's net asset value. As long as mNAV > 1, the company can obtain more than the equivalent value of BTC for each MSTR or STRC issued. If mNAV falls below 1 (i.e., the share price is lower than the value of each BTC unit), this arbitrage mechanism will fail.

The current mNAV is 1.23, which has narrowed significantly from the earlier 1.5-2.0 range. If it continues to converge to around 1, STRC's ATM funding will become unsustainable , dollar reserves will be insufficient to replenish, and ultimately, a sell-off of tokens will be triggered.

⚠️ Risk 2: BTC stagnation in the long term + STRC selling difficulties → forced selling cycle

This is a vicious cycle of positive feedback, and it represents the worst-case scenario currently anticipated by the market.

• BTC not rising → STRC new buyers are taking a wait-and-see approach (unwilling to take over assets that are depreciating).

• STRC sales stagnate → Dollar reserves continue to be drained.

• Reserves depleted → Forced to sell BTC to pay interest

• Selling BTC → Depresses BTC price, further weakening the appeal of STRC

• Loop back to step 1

At the current rate of depletion of the $900 million reserve (monthly expenditure of approximately $125 million), the reserve can last for about 7 months. This means that if new STRC issuance continues to stagnate, early 2027 will be a critical tipping point, with cash reserves running out.

⚠️ Risk 3: Deferred preferred stock dividends → Market confidence collapse

STRD's prospectus explicitly states that dividends are non-cumulative, meaning the company can suspend payments at any time without needing to retroactively pay them . While STRC's dividends are not explicitly stated to be non-cumulative, they fall under the category of board discretionary. Theoretically, MicroStrategy could legally suspend all preferred stock dividends.

However, suspending dividends would be extremely costly, immediately triggering a repricing of all preferred stock series in the market, destroying the STRC's product positioning as a savings account alternative, and effectively rendering the entire preferred stock financing plan obsolete.

6.3 What risks are not present? Will Bitcoin be liquidated?

❌ Risk of Forced Liquidation : MicroStrategy's convertible bonds are all unsecured debts, and Bitcoin has never been used as collateral. A sharp drop in Bitcoin price will not trigger a forced sale of reserve Bitcoin. The liquidation rumors in early June 2026 have been officially clarified as a routine adjustment to the balance sheet.

❌ Risk of debt default : The $1.05 billion convertible bonds maturing in February 2027 are the most recent batch. At that time, MicroStrategy has several options: repay with cash, issue new bonds to replace them, or encourage holders to convert their bonds into shares. With $900 million in cash reserves and continuous preferred stock financing, there is no risk of technical default in the short term.

❌ Interest expenses are crushing the profit statement : The annual interest on convertible bonds is only $34.6 million, which is negligible compared to the company's market capitalization of $44 billion. The real burden lies in the preferred stock dividends ($1.712 billion), but these dividends are deferred and not guaranteed.

The period from February 2027 to September 2028 is the peak redemption period for MicroStrategy. Within 12 months, more than $5.9 billion of convertible bonds will face put options or maturity, and repaying the principal is the biggest issue.

7. What would happen to Bitcoin if the worst-case scenario occurred?

7.1 Bitcoin will not be subject to forced liquidation.

First, it's important to clarify one fact: the 843,706 bitcoins held by MicroStrategy have never been used as collateral for any debt . All convertible bonds are unsecured debt, and the preferred stock is purely an equity instrument. This means:

• No matter how low the price of Bitcoin falls, no creditor has the right to force MicroStrategy to sell Bitcoin to repay its debts.

• Even if MicroStrategy enters bankruptcy proceedings (which is highly unlikely), Bitcoin will be distributed to creditors as company assets during liquidation and will not be sold on the market.

7.2 Worst-case scenario selling pressure estimation

Even if MicroStrategy is forced to take the path of selling tokens to pay interest (STRC is unsellable + reserves are depleted), the amount that needs to be sold is far less than imagined during market panic:

• Annual sales required: Based on $63,409/BTC, approximately 27,000 BTC/year.

• Percentage of total holdings: 3.2%

• Daily sales required: Approximately 74 BTC

• In comparison, Bitcoin's daily trading volume is typically 200,000 to 500,000 coins.

This means that in the worst-case scenario, the marginal impact of micro-strategy's selling behavior on the market is approximately 0.02%-0.04% of the daily trading volume, which is insufficient to trigger a systemic sell-off.

7.3 The real market impact lies not in selling pressure, but in confidence.

The sale of 32 BTC ($2.5 million) in early June 2026 caused BTC to drop from about $73,000 to $63,000 within 48 hours, wiping out about $60 billion in market value, which is 24,000 times the actual sale amount.

This shows that the real pricing factor in the market is the possibility of micro-strategies selling, and the most valuable thing is the story of never selling, which has now been broken with only 32 bitcoins.

8. MicroStrategy did not betray Bitcoin. It simply finally acknowledged that Bitcoin also has to pay its dues.

If we were to summarize MicroStrategy's story from 2020 to 2024 in one sentence, it would be that a software company decided to convert all its cash into Bitcoin. But the story from 2025 to 2026 is entirely different.

Microstrategies are no longer just simple HODL machines. What they're doing is essentially no different from banking: processing underlying assets like Bitcoin into financial products with varying risk-return characteristics and selling them to different types of funds .

• MSTR common stock → Sold to equity investors who want directional leveraged exposure to BTC.

• STRK (convertible preferred stock) → Sold to hedge funds seeking both a guaranteed return and upside potential.

• STRF/STRD (High Yield Preferred Stock) → Sold to fixed-income investors seeking higher returns.

• STRC (Dynamic Rate Preferred Stock) → Sold to stable funds seeking "savings account alternatives".

• Convertible bonds → Sold to institutions that engage in volatility arbitrage

Thaler envisions establishing a private Bitcoin bank that uses Bitcoin as its underlying reserve, the US stock market as its financing channel, and preferred shares to deliver yield products to the fixed-income market.

The prerequisite for this machine:

• BTC is expected to rise in the long term (with an annualized return of at least 2-3% to cover dividends).

• mNAV maintains a premium (to preserve arbitrage opportunities and financing capabilities).

• The preferred stock market remains open (STRCs are selling well).

If all three conditions are met, Saylor might truly have transformed a software company into the Berkshire Hathaway of the digital age. But if one condition fails, especially if the mNAV premium disappears, the story quickly returns to reality.

Short-term outlook (second half of 2026) : No risk of default. $900 million in cash reserves can cover approximately 7 months of interest payments, and the 31-year BTC coverage provides a significant buffer. The key observation window is 2027. If the nNAV premium remains below 1.1 and STRC issuance stagnates by then, MicroStrategy will be forced to shift from a net buyer to a net seller.

Long-term assessment : It's playing a sophisticated, public, credit leverage game backed by real assets . It has real Bitcoin assets (843,706 coins), real software revenue (approximately $500 million annually), and real fundraising capabilities ($11.7 billion raised by 2026). However, its vulnerability also lies in this: it's highly sensitive to market sentiment and fundraising premiums, and these things dissipate even faster than Bitcoin's price drops during bear markets.