Bitcoin rout leads Strategy's STRC to slide 26% below par as MSTR shares hits 16-month low

Strategy's STRC perpetual preferred stock, the primary engine behind its recent bitcoin accumulation, slid to a record low on Thursday, falling as much as 26% below its $100 par value. Alongside this, Strategy's common shares dropped to their lowest levels since February 2024 as bitcoin sank to $58,000.

STRC traded as low as $74 before recovering to around $77.50, while MSTR dropped below $87, extending a decline of more than 50% in just over a month, according to The Block's crypto equities page.

This came as bitcoin (BTC) briefly returned to the $58,000 level for the first time since October 2024 ahead of a massive $10.6 billion quarterly options expiry on Friday.

Strategy, and its Chairman Michael Saylor, is no stranger to being criticized for its bitcoin-focused business model. Before Strategy began issuing preferred shares, skeptics often argued that (MSTR) was little more than a leveraged proxy for bitcoin and that a prolonged bear market would eventually cause everything to unravel.

But Strategy was able to shake most of these arguments off after weathering the 2021-2022 bear market and eventually seeing MSTR rally by over 450% in the years that followed. Things are different now, and instead of the focus being solely on the price of bitcoin, investors are now scrutinizing the financing structure that Saylor has built up to power its BTC accumulation engine.

For the past year or so, Strategy has been issuing and tapping preferred securities like STRC to raise capital for additional bitcoin purchases.  Unlike common stock, these preferred shares carry cumulative dividend obligations — 11.5% annually in STRC's case.

Now, the focus is less on whether the bitcoin price will recover and more so whether Strategy has enough financial flexibility in terms of cash reserves, dividend obligations, and convertible debt.

What can Strategy do?

Earlier this week, onchain analytics firm CryptoQuant argued that Strategy should pause bitcoin purchases and rebuild its cash reserves, saying annualized preferred dividend obligations have climbed to roughly $1.2 billion while its cash reserves have declined to around $1.4 billion.

Castle Island Ventures general partner Matt Walsh struck a similar tone in a thread posted Thursday, arguing that Strategy's outstanding convertible notes may now represent a bigger near-term challenge than its preferred shares.

"This does not look like an asset coverage problem today," Walsh wrote. "It looks like a timing and capital markets problem."

Walsh said he would prioritize rebuilding liquidity, repurchasing or refinancing convertible debt, and pausing additional bitcoin purchases to reduce the risk that Strategy could eventually be forced to sell bitcoin.

This pressure has also trickled down to Strive's perpetual preferred stock, SATA, as it fell to a record low near $84 on Thursday. During last week's STRC selloff, SATA briefly dipped to around $94 before quickly rebounding within roughly 1% of its $100 par value.

But not everyone is bearish. Earlier this week, equities analysis firm Benchmark reiterated its Buy rating and $570 price target on Strategy, arguing that the recent declines in MSTR and STRC are more of a stress test of the company's funding model rather than evidence of a structural breakdown.

Benchmark also emphasized that STRC was designed with a variable dividend mechanism and was never intended to function as a fixed-price instrument, despite Strategy's stated objective of supporting trading near its $100 par value.