Author: Chloe, ChainCatcher

Since Strategy launched STRC at the end of July 2025, Bitcoin has fallen by about 40% or nearly 50%. This preferred stock, which was designed to "trade at a par value of $100," is now stuck at a deep discount: it hit an all-time low of $82.53 in intraday trading last Thursday, and has only closed back at $88.59, still about 13% below par value. As the discount widens, STRC's effective yield has been pushed to more than 12.9%, approaching 13%.

Jesse Myers, director of Bitcoin strategy at The Smarter Web Company, said, “Strategy is fine,” while economist Peter Schiff once again called the entire structure a “classic centralized Ponzi.”

As a result, those old questions were brought back to the table: Will Strategy be forced to sell coins? Is the flywheel it relies on for expansion a Ponzi scheme?

STRC is a mechanism designed by AI?

To talk about STRC, we must first talk about a detail that is easily overlooked but has been re-fermented in this wave of decline: this structure was created by Saylor and AI.

The controversy stems from a May CoinDesk interview that was recirculated on X. Saylor admitted in the clip that he used artificial intelligence heavily in developing Strategy’s preferred equity products. He said that when he was working on Stretch, these things were all designed by him using AI. He couldn't do it by himself. He spent several hours discussing back and forth with AI.

According to his statement, he constantly throws various structural settings to AI to test whether some atypical ideas are legally tenable. When he asked, "I want a preferred stock that pays monthly dividends and has a stable price of $100," AI's response was: No one has ever done that in history, but it's completely legal and completely reasonable.

Interestingly, when STRC fell below its face value and the market began to question whether this mechanism could sustain it, many foreign media simply turned back and asked AI, including ChatGPT, Grok and Claude, whether STRC could rise back to $100.

Will Strategy sell coins again?

Not long ago, Strategy sold 32 BTC worth approximately $2.5 million to cover dividend obligations. This magnitude is insignificant compared to its overall Bitcoin reserves, but it proves one thing: when the efficiency of STRC-led financing declines, cash obligations can indeed force limited currency selling.

What deserves more vigilance is the freezing of buying orders. Strategy’s pace of increasing its holdings of Bitcoin has slowed down significantly: In April this year, it spent $2.54 billion to buy 34,164 BTC in a single week; in May, it added another 24,869 BTC for about $2.01 billion. But by June, weekly buying volume had shrunk to around $100 million. 1,550 coins (US$101 million) were purchased in the week ending June 8, and another 1,587 coins (US$100 million) were purchased in the week ending June 15, bringing the total holdings to 846,842 coins.

In addition, the expansion of the discount not only pushed up the yield, but also put the "at-the-market" (at-the-market, that is, the mechanism of selling new shares into the open market in batches to raise cash at the current market price) on hold. This financing channel is a key link in supporting the entire Bitcoin flywheel.

But bulls don’t buy this “death spiral” narrative. Jesse Myers believes that this STRC sell-off looks more like leverage unwinding than a deterioration in fundamentals. He estimates that if conditions remain unchanged, Strategy's current status alone will be enough to pay STRC dividends for 32 years; and as long as Bitcoin appreciates about 2% per year, this obligation can be covered indefinitely. What’s more, the tool itself of issuing shares has not disappeared. Even if additional issuance at market prices is temporarily suspended, Strategy still maintains multiple backup financing options, including restarting the issuance of MSTR ordinary shares, using cash reserves, and selling coins when necessary.

This is a classic Schiff playbook on the short side. He argued that if Saylor raises the yield to 13%, it will have to sell more MSTR at a larger discount to raise financing; if it does not raise the yield, the price of STRC will continue to fall. In his view, the only way to end this death spiral is to simply cancel the dividend, but that would immediately crush STRC and drag MSTR down with Bitcoin.

Is this flywheel a Ponzi scheme?

Schiff’s accusation is straightforward. STRC is a “classic centralized Ponzi” because its operation depends on whether Strategy can continue to raise new money through a new round of stock issuance, or simply sell Bitcoin to fulfill its obligations. Even trader DonAlt publicly questioned why STRC’s price action was “trading like a Ponzi” after falling below par.

Strategy has not responded head-on to such accusations, continuing to position STRC as a preferred stock backed by its Bitcoin DAT strategy. A more specific action is to change STRC's dividend payment from monthly to semi-monthly, that is, twice a month.

The core argument of the opposition is "leverage clearing". Myers pointed out that the problem is not the structure itself, but that STRC has been trading at $99 to $100 for a long time, inducing investors to bet on heavy leverage. Many people assumed that this instrument would stay stable above $95; once the price fell, margin calls and forced liquidations amplified and accelerated the decline.

Analyst Scott Melker provided another perspective: discounts may attract buyers seeking yield. Because STRC's dividends are based on a $100 liquidation preference, not market value. With a dividend yield of 11.5%, someone who bought at $90 actually got a yield of about 12.8%, and someone who bought at $85 got about 13.5%. The deeper the discount, the higher the effective yield, which in itself is bait.

So the question of "whether it is Ponzi" ultimately depends on which explanation the market believes: One theory is that this mechanism can only be operated by continuously bringing new money into the market. The money of new people entering the market is used to pay those who entered the market first. This is the characteristic of Ponzi. Another way to say it is: There is nothing wrong with the instrument itself, but people thought it was very stable and borrowed money to increase their positions. This time when the price slipped, these people were forced to take losses and get out, which amplified the decline. This was a one-time washout, not a problem with the instrument itself.

Semi-monthly dividend payment has officially come into effect. The answer may be revealed in June?

Recalling what was mentioned above, since this mechanism was designed by Saylor using AI, many foreign media simply threw the same question back to AI: can STRC return to $100, and what should Strategy do to rebuild market confidence. The common answer from ChatGPT, Grok, and Claude is, “Back to $100 comes with strings attached.”

ChatGPT believes that a return to $100 is still possible, but will require a combination of stronger market confidence, sustainable dividend coverage, and a rebound in Bitcoin prices. It emphasized that the fastest path to recovery is for investors to regain confidence that dividends can be maintained without relying on selling assets. If more currency sales are really needed in the future, confidence may deteriorate further.

Grok has the most reserved attitude, saying bluntly that "it may be possible, but it will be extremely difficult." In its view, the market is essentially asking whether the engine that feeds the currency-buying machine can still run. It believes that a sustained wave of Bitcoin rise will be the most effective catalyst; on the contrary, long-term weakness will weigh on both STRC and MSTR.

Claude pointed out that preferred stocks can often be restored from discounts to par value, but only if investors regain confidence in the issuer's ability to meet long-term obligations. "A fix is possible, but what the market needs to see is evidence that this structure works during adversity, not just when Bitcoin is rising."

So, are there any problems with this strategy? Whether short Schiff, bullish Myers, or top AI models, they all point to the same decisive variable: whether Strategy can continue to fulfill its dividend obligations without selling coins.

The flywheel in front of us has not stopped, but it is obviously turning slower: additional issuance at market prices has been suspended, and the currency buying rate has shrunk from billions of dollars per week earlier this year to about $100 million per week in June; the sale of 32 BTC further proved that when the issuance of shares does not go well, the door to "selling currency to pay interest" has been opened. As for whether it is a Ponzi or a one-time leveraged wash, it depends on whether STRC can regain its face value and how Strategy pays interest.

The most specific observation point falls on June 30: On that day, STRC's change to semi-monthly dividend payment officially took effect, but the real highlight is the set of rules that automatically adjust the dividend rate based on price. If the average price of the month is less than 95 US dollars, it is recommended to raise interest rates, and it will not stop until it is above 99 US dollars. Now it's mired below $95, a rate hike is all but certain, and the dividend yield has climbed to 11.5% from 9% in August 2025.

This is the core of Schiff's death spiral. The lower the price, the more automatically the mechanism will push the dividend rate upwards, and the larger the cash bill will be. In the end, it can only be filled by issuing more shares or selling more coins. Whether this mechanism is a "stabilizer" or an "accelerator", the answer lies in the following prices and interest rates.