With Bitcoin plunging below $60,000 and Strategy’s share price down by more than 70% from the high, some crypto investors are questioning if Strategy could become this cycle’s Terra/LUNA — a highly leveraged bet on crypto market structure that explodes under stress.
The company’s response? A new capital framework released on Monday aimed at addressing investors’ fears.
The package includes up to $1 billion in buybacks for MSTR, up to $1 billion in buybacks for STRC and related securities, an increase in STRC’s dividend to roughly 12%, and a cash buffer expansion to $2.55 billion.
Of particular note for a company famed for its maximalist approach to Bitcoin, Strategy also said it may sell up to $1.25 billion in BTC holdings if required to meet dividend or debt obligations.
Markets responded positively to the news, with both STRC and MSTR shares rallying more than 12% in after-hours trading. STRC is currently trading at $84.86, a significant improvement on the $72.06 it was trading at on June 26.
STRC share price rallied by over 12% in after-hours trading. Source: Yahoo Finance.
But is the plan enough to assuage fears that STRC’s structure — famously cooked up by CEO Michael Saylor with the help of an LLM — could expose Strategy to a “death spiral” of reflexive funding risks during periods of market stress?
What is STRC and why is it controversial?
STRC is part of Strategy’s capital structure linked to its broader Bitcoin treasury strategy. It sits between traditional equity and debt-like instruments, offering investors yield while maintaining exposure to the company’s Bitcoin holdings.
Related: Strategy’s MSTR may plunge 80% if it repeats this dot-com-era fractal
Strategy describes STRC as a perpetual preferred stock paying a 12% annual dividend on a $100 par value, funded from its cash reserve and Bitcoin-linked capital framework.
While the structure is designed to provide financing flexibility without issuing traditional debt, analysts have questioned whether its stability depends on continued investor demand in secondary markets, particularly during periods of Bitcoin volatility or tighter liquidity conditions.
By contrast, Strategy’s common stock is called MSTR and it represents an equity ownership stake in Strategy along with voting rights. The fate of the two securities is closely aligned, but they are different. Similarly, Strategy’s position as the largest buyer of Bitcoin (and perhaps in future as a seller) means its fate is closely intertwined with the price of Bitcoin at present.
Perpetual goldbug and Bitcoin critic Peter Schiff has repeatedly called out Strategy’s model, pointing out that it “can’t sell Bitcoin without crashing the price of Bitcoin. Even if Strategy merely stops buying Bitcoin, that change alone would crush the market.”
Strategy describes STRC as a short-duration, high-yield credit. Source: Strategy
Yet Taran Dhillon, head of digital assets at Kula, told Cointelegraph that “Bitcoin volatility alone is unlikely to break a structure like Strategy’s.”
He said that a more meaningful test is “whether Bitcoin remains under pressure while access to capital becomes progressively more expensive or difficult.”
The Bear case: feedback loops and liquidity dependency
Some argue that Strategy’s entire fundraising and equity model is inherently reflexive, compounding both upside and downside cycles. The same flywheel that amplifies gains in bull markets can accelerate losses during the bear, when falling Bitcoin and share prices collide with weaker demand.
Ripple CEO Brad Garlinghouse made that exact point on CNBC this week. “Financial engineering does not drive long term value,” he said.
Kyle Rodda, senior analyst at Capital.com, told Cointelegraph that Strategy effectively operates as a momentum-driven Bitcoin accumulation vehicle, in which capital raises funds for Bitcoin purchases that, in turn, support the company’s valuation. However, he warned that the dynamic can reverse under stress.
“Strategy’s business definitely compounds momentum in both directions,” Rodda said, adding that in weaker conditions, rising funding costs and declining investor appetite can reinforce downward pressure.
Related: Grayscale’s Pandl says Strategy should sell $3B Bitcoin to restore confidence
He also argued that secondary market liquidity is a structural dependency, meaning large-scale selling or refinancing pressures could have wider spillovers into Bitcoin markets themselves.
Among Bitcoiners, Charles Edwards, the founder of Capriole Investments, is one of Strategy’s most hawkish commentators of late.
He compared stressed conditions in digital asset treasury companies to broader crypto deleveraging events, warning that feedback loops can accelerate losses when leverage and sentiment deteriorate.
“Anyone else getting LUNA 2022 vibes on MicroStrategy?” he posted on June 26.
Comparing Strategy to Terra/LUNA. Source: Charles Edwards
The neutral view: the real risk is…
cointelegraph.com