Author: Jesse Myers, Director of Bitcoin Strategy at Smarter Web Company, a Bitcoin treasury company; Compiled by: Golden Finance Claw Compiler

STRC recently fell below $85 and continued to lose its anchor at $100.

1. There is no problem with the fundamentals

As long as the current status quo remains unchanged, Strategy has the ability to continue paying STRC dividends for 32 years; if the annual compound growth rate of Bitcoin is maintained at around 2%, the dividends can be paid permanently.

2. The cause of this STRC plunge: serial liquidation and stampede

The market has generally reached a consensus in the past six months: STRC volatility has continued to decline, and the price has been stable in the range of 99 to 100 US dollars for a long time.

This kind of market situation can easily attract leveraged funds to enter the market. Once investors assume that the price will never fall below $95, they will add 20 times leverage to increase their positions in STRC, thereby significantly increasing the dividend yield of the overall position.

This strategy will make huge profits when times are good, but will completely collapse once the market reverses.

STRC is a fully market-oriented trading asset. After the market capital heat turned to SATA and STRC prices weakened, short-selling hedge funds with a keen sense of smell took advantage of the trend and focused on it.

These institutions aggressively shorted stocks, driving down underlying prices, triggering margin calls on a large number of highly leveraged positions, and triggering chain liquidations.

Today’s market trend is a typical serial liquidation stampede: the price fell rapidly, which further triggered more liquidation and selling pressure, forming a vicious circle.

3. Deduction of subsequent market trends: the market will repair itself

Arbitrage hedge funds will soon realize that the current situation is an oversold selling market, and the underlying fundamentals of STRC have not changed in any way, and will then enter the market to hunt for the bottom; short positions will be closed at profits, which will also be converted into buying orders; ordinary investors will usher in an excellent entry price for long-term layout of STRC.

If you enter the market at the current price, the actual dividend yield is about 13.7%; if the subsequent price returns to $100 and you sell, you can easily gain an 18% gain.

4. MicroStrategy’s possible response actions

There is a high probability that the dividend payment ratio will be increased on June 30, and the increase may be to 11.75%, and may reach a maximum of 12%. By then, investors who enter the market at the current price will see the actual dividend yield increase to 14.2%.

It is also possible to directly repurchase STRC shares in the secondary market. There are two sources of funds: one is to issue additional MSTR shares (the current stock price is 1.14 times the net assets per share); the other is to use funds to raise STRC at low prices in the market through traditional credit financing.

After the price of STRC rebounds to US$100, the company can re-circulate the repurchased STRC shares for sale. The price difference income of nearly US$15 per share can be used to increase Bitcoin holdings, purely increasing the equity of MSTR shareholders, and will not change the original asset leverage magnification.

Saylor (Saylor, founder of MicroStrategy) has undoubtedly considered this set of operating logic, and it is not surprising that the company is already implementing it.

5. Summary

The market is currently panicking, and this price breakage is compared to the collapse of Terra/Luna that year, but the two are completely different in nature.

Whether STRC can continue to pay dividends depends on MicroStrategy's balance sheet - and the fundamentals of this financial report have not changed yet.

This decline was purely caused by the liquidation of leveraged funds.

After this incident, the market will realize that the volatility of digital credit assets is extremely low under normal circumstances, but precisely because it is a freely traded subject: if a digital credit product fluctuates within a narrow range close to parity for a long time, greedy funds will eventually continue to pile up leverage, laying the hidden danger of leverage liquidation and price de-anchoring.

After the stampede, market sentiment returned to rationality, and funds realized that the issuer's balance sheet was intact, dividend payments would not be interrupted, and the underlying price would eventually gradually recover and return to a parity range.