Strategy issues $1.2 billion of STRC to drive bitcoin purchases in U.S. capital markets

A new research note from NYDIG is shedding light on a lesser-known driver of bitcoin purchases: the preferred-stock issuance by companies like Strategy and Strive.

According to the report, these instruments—STRC for Strategy and SATA for Strive—are increasingly shaping demand for bitcoin, yet many investors misunderstand their structure and mechanics.

Preferred Equity Replaces Traditional Funding

Over the past week alone, Strategy issued roughly $1.2 billion of STRC, bringing total outstanding STRC to just over $5 billion.

Combined with another $5 billion of preferred equity, Strategy’s total preferred stack now exceeds $10 billion, surpassing convertible debt in the company’s capital structure.

NYDIG emphasizes that these instruments are less about traditional debt financing and more about managing a bitcoin-backed liability system that relies on capital markets and investor confidence.

How STRC and SATA Work

Unlike conventional debt, these preferred securities sit between debt and common equity, are unsecured, and carry variable, discretionary dividends with limited governance rights.

NYDIG stresses that they are not designed to be serviced by operating cash flow; rather, they function as capital market vehicles where the corporate balance sheet, anchored by bitcoin holdings, supports ongoing issuance.

Traditional credit metrics like EBIT-to-interest coverage are therefore poor indicators of their sustainability.

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The Bitcoin Flywheel

NYDIG describes a self-reinforcing cycle: preferred securities trade near par, enabling capital raising; that capital buys bitcoin, which strengthens the balance sheet; stronger balance sheets maintain investor confidence, allowing continued issuance.

Common equity that trades above NAV further amplifies this loop, creating a feedback mechanism that increases bitcoin demand.

However, the flywheel is conditional.

A decline in bitcoin, weaker investor confidence, or preferreds slipping below par can stall issuance.

In such cases, adjustments—like dividend deferrals, rate changes, or deeper subordination—help manage risk without triggering insolvency.

NYDIG even likens STRC to being short a put option on bitcoin asset coverage, offering yield in exchange for downside exposure contingent on management discretion.

Impact and Consequences

This structure has several implications:

• Preferred equity has become a major incremental source of bitcoin demand
• Investors may misprice risk if they view these instruments through a traditional debt lens
• Corporate balance sheets are increasingly reliant on bitcoin valuations and capital market access
• Volatility in bitcoin prices or capital markets could temporarily pause issuance, affecting bitcoin demand cycles

What’s Next?

Key developments to watch include:

• STRC and SATA trading levels relative to par, which dictate issuance feasibility
• Bitcoin market performance, as price drops could disrupt the flywheel
• Investor sentiment and appetite for discretionary preferred yields
• Strategy’s continued capital raising and bitcoin purchases, which may further expand the preferred stack

Investors and analysts will be closely monitoring these dynamics to gauge both corporate and bitcoin market risk.

Summary

NYDIG’s analysis highlights that Strategy and similar firms are using preferred equity, not traditional debt, to finance bitcoin purchases.

These instruments operate within a capital market–dependent, bitcoin-backed liability system, creating a conditional “flywheel” that can amplify bitcoin demand when market conditions and investor confidence remain strong.

Misunderstanding these securities could lead to misjudging the risk exposure and sustainability of such structures.

Bulleted Takeaways

• Strategy issued $1.2B of STRC in one week, total preferred stack now exceeds $10B
• Preferred securities function as a capital market vehicle, not traditional corporate debt
• Instruments sit between debt and equity, with variable dividends and limited governance
• STRC/SATA create a bitcoin “flywheel” where capital raising funds more bitcoin purchases
• System is conditional; declines in bitcoin or market confidence can stall issuance
• Preferreds absorb adjustments via dividend deferrals or rate changes, not insolvency triggers
• BTC price at press time: $70,885, influencing both balance sheet and investor confidence