Bitcoin, MSTR, and STRC are all falling, has Strategy’s Bitcoin ‘perpetual motion machine’ really stopped turning?

Author: David Christopher, Bankless analyst

Compiled by: Yuliya, PANews

Editor's Note: This article delves into the severe financial challenges currently faced by Michael Saylor's Strategy. The company's operating system is highly dependent on three pillars: Bitcoin, MSTR common stock, and STRC preferred stock, but all three are weakening simultaneously. As the pressure of preferred stock dividend payments surges and cash reserves dwindle, Strategy finds itself in a dilemma: continue to bear the cost of diluting shares, or break with tradition and sell its prized Bitcoin reserves? The following is the detailed translation:

Now, Strategy, under Michael Saylor's leadership, is experiencing its most severe crisis:

Its STRC preferred stock has fallen to around $80, marking the largest discount relative to its $100 face value in history;
MSTR shares have also continued to decline, breaking below the $100 mark for the first time since March 2024;
At the same time, Bitcoin has fallen below $60,000.

This crisis did not come out of nowhere but began brewing in late May. At that time, Strategy repurchased debt and sold a symbolic amount of Bitcoin to pay preferred stock dividends, then continued to buy Bitcoin even as market confidence in STRC began to crack.

It can be said that today marks the moment when all warning signs converge.

The Three Pillars Keeping the Machine Running

Strategy's architecture consists of three interdependent parts:

Bitcoin is the reserve asset: It is the world's third-largest asset, with the core selling point of "only rising, never falling." However, Bitcoin itself generates no output, dividends, interest, or income. While Strategy can hold it indefinitely, preferred stock dividends must be paid in cash, so a mechanism must exist to bridge this funding gap. Right now, this asset-income mismatch is under severe stress.
MSTR common stock is the core engine: When MSTR's stock price trades above the value of its underlying Bitcoin, Strategy can issue new shares to buy more Bitcoin, and this premium makes the purchases increase company value. However, once MSTR's price falls, the cost of this strategy rises. Raising $500 million at a $500 share price requires issuing only 1 million shares; but if the price drops to $50, 10 million shares must be issued. The same capital raised, but with ten times the dilution, greatly weakening the rationale for investors to hold MSTR.
STRC preferred stock is the credit pillar: This is a preferred stock with a face value of $100, paying an 11.5% cash dividend. When the price falls, Strategy can attract buyers by increasing the dividend rate. But for this mechanism to work, investors must believe that dividends will continue to flow, and that trust is now nearing its expiration date. STRC now hovers around $80, which is the market effectively saying, "You want us to treat it as a $100 asset? Then you need to offer a much higher yield."

These three parts support each other; if one falters, all suffer. As they all weaken simultaneously, attention shifts from "how many bitcoins Strategy actually owns" to "whether it still has enough dollars to honor its dividend commitments."

The Current Predicament

Strategy is now losing both "trust" and "liquidity," and the two are viciously compounding each other.

As Bitcoin falls, MSTR often falls even more, as the market treats it as leveraged Bitcoin. And the decline in MSTR's share price makes raising cash by selling stock more painful, pushing all funding pressure onto the reserve asset.

Reports indicate that STRC's annual dividend bill has surged from about $300 million in January to around $1.2 billion today, while cash reserves have shrunk dramatically due to debt repurchases and Bitcoin purchases. The funding runway to cover these dividend payments has shrunk from over seven years to about 14 months.

This is the predicament the company is stuck in. While there are ways out, each path comes with a heavy cost:

Continue buying Bitcoin: further drains cash reserves, weakening market trust in STRC.
Issuing more MSTR common stock: means more severe dilution, eroding investor incentive to hold MSTR.
Issuing more preferred stock: adds further dividend obligations, and raising STRC's dividend rate only deepens the cash drain.
Stopping dividend payments: absolutely not an option, as that would destroy trust and cause the entire system to collapse. Since the entire structure depends on it, after all calculations, only one path remains: sell Bitcoin.

Why Selling Bitcoin is a Double-Edged Sword?

Selling Bitcoin can quickly replenish cash reserves. Strategy could use the proceeds to pay dividends or even buy back STRC below face value, redeeming $100 worth of claims for around $82. From a financial statement perspective, this makes perfect sense. Analytics firm CryptoQuant notes that to restore a 24-month funding runway, Strategy needs about $2.8 billion, approximately $1.4 billion more than its current reserves.

However, this would require dumping a massive amount of Bitcoin.

In fact, Strategy has already tested these dangerous waters. On June 1, the company announced it had sold just 32 bitcoins (worth about $2.5 million), a mere rounding error against its total holding of over 840,000 bitcoins. But since then, MSTR's share price has plunged about 38%.

Investors were willing to hold MSTR precisely because the company almost never sold its assets. It was supposed to be a leveraged, long-term bet on hoarding Bitcoin in the vault forever. However, the moment Strategy started selling Bitcoin to pay its own preferred stock dividends, the vault was no longer sacrosanct; it became a funding source to keep the superstructure running. This fundamentally alters expectations about future funding shortfalls: if a $2.5 million sale is acceptable, then larger sales are no longer unthinkable.

Moreover, selling Bitcoin now would turn paper losses into realized losses. CryptoQuant estimates that on bitcoins purchased between 2024 and 2026, Strategy is sitting on about $10.6 billion in unrealized losses. If held, these losses remain theoretical; but if sold near current levels, the losses become locked in. Yet, this cleanest resolution is also the move most likely to validate market panic.

To be clear, this does not mean Saylor will dump all his chips tomorrow.

Strategy still has cash on hand, can still issue stock or raise STRC dividends, and Bitcoin could still bounce back. So the machine isn't completely broken today.

But the road ahead is clearly getting darker. Looking back at the series of moves since late May — debt buybacks, symbolic sales, stock issuance, continued Bitcoin purchases — all while STRC kept falling. Every sign indicates that this architecture has exhausted its easy crisis-management tools.

Best case: if Bitcoin surges, MSTR follows, STRC yields attract buyers again, and the whole flywheel spins back into high gear. But if an architecture must rely on dilution, higher dividends, or selling Bitcoin just to maintain investor trust, then it has already lost its former luster.

Worst case: Strategy bought itself some breathing room through dilution and buying more Bitcoin, but the dividend bill is compounding. The most obvious self-rescue — "stop buying, start hoarding cash" — would kill the only engine propping up the entire corporate narrative.

This is the dilemma Saylor faces:

If he sells Bitcoin, he personally destroys the grand narrative of "permanent hoarding" that made MSTR what it is today;
If he refuses to sell, all the pressure concentrates on dilution, dividend payments, and cash reserves.

Neither path is easy, and both could severely hit market confidence in Strategy, and even ripple out to other treasury companies built on the same philosophy.

Yet, sometimes the most painful path forward is the one that must be taken. Hopefully, better times are ahead.