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Bitcoin extended its decline Thursday as concerns over Strategy’s funding model added pressure to a market already weighed down by rising rate expectations.
The largest crypto asset fell as much as 3.3% to $62,229, moving back toward the $60,000 level it briefly broke below two weeks ago. Bitcoin has now lost roughly half its value since reaching a record high in October.
The latest pressure is centered on Strategy’s Stretch preferred stock, known as STRC. The preferred shares were designed to help Strategy raise capital at a $100 par value and use the proceeds to buy more Bitcoin, while paying holders a double digit annual dividend.
That mechanism becomes harder to sustain when STRC trades below par. The stock has not traded at $100 since May 15, the ex dividend date for last month’s payout, and fell below $83 on Thursday.
Traders are now treating STRC as a proxy for stress in Strategy’s capital structure. If the preferred shares remain below par, Strategy can no longer sell them as efficiently to fund new Bitcoin purchases. Raising capital below par also increases the effective yield the company must pay to buyers.
“All eyes are on STRC price as a measure of market pressure on Strategy,” said Joshua Lim, global co head of markets at FalconX. “The market is likely to test the company’s resolve to continue buying BTC instead of selling a block to shore up cash reserves and extend the STRC dividend runway.”
The weakness comes after Strategy bought back $1.5 billion of its 2029 convertible senior notes, according to QCP Capital. That has added to concerns that the company may need to sell more Bitcoin or issue common stock to manage its dividend obligations.
Saylor already rattled markets earlier this month by selling a small amount of Bitcoin after years of telling holders not to sell. The move was small, but it challenged the core market assumption behind Strategy’s strategy: that the company would remain a permanent buyer of Bitcoin.
Jeff Dorman, chief investment officer at Arca, said Strategy may need to sell a large amount of Bitcoin or common stock to stabilize the preferred shares near par. Otherwise, he said the uncertainty could keep weighing on the company’s broader capital structure.
Strategy shares fell about 6% on Thursday and are down roughly 16% since Monday’s close. The stock has lost about 70% over the past year.
The pressure is spilling into the broader crypto market. Ether and Solana have also struggled this week, even as broader equity markets continued to trade higher.
Rate fears are adding to the strain. Higher expected interest rates tend to reduce demand for risk assets, creating a tougher backdrop for Bitcoin at the same time Strategy’s financing model is under scrutiny.
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