MicroStrategy has transformed itself from a software company into the world’s largest publicly traded Bitcoin proxy. Through its financing arm Strategy, it now offers investors new ways to gain exposure to Bitcoin — each with its own mix of risks and rewards.
How It Works
Every time MicroStrategy or Strategy raises capital — by issuing common stock (MSTR), preferred stock (STRC), or convertible debt — the proceeds are used to buy more Bitcoin.
This creates a flywheel:
- Bitcoin rises → balance sheet grows → easier to issue more securities.
- Bitcoin falls → balance sheet shrinks → obligations get harder to sustain.
Both MSTR and STRC holders are diluted each time new securities are sold. What differs is how they benefit from Bitcoin’s moves.
Breaking Down the Products
MSTR (common stock):
Equity ownership. Gains are leveraged to Bitcoin’s price, but dilution reduces your share.
STRC (preferred stock):
Pays ~9% annual dividend. Works like a bond — you don’t own the company, you just expect income. Returns are capped, and dividends depend on Strategy’s ability to fund them.
BTC ETF:
Pure Bitcoin exposure. No dilution, no yield, but transparent and liquid.
Physical Bitcoin (self-custody):
The purest exposure. No counterparty risk, no dilution, no engineering. But it requires discipline: securing private keys, protecting seed phrases, and resisting the temptation to offload custody to third parties. For long-term believers, this is the safest and most sovereign way to hold Bitcoin.
Where Does STRC’s Yield Come From?
The ~9% yield on STRC doesn’t come from “Bitcoin interest” — it’s financed by Strategy’s capital structure. Dividends can be paid in three ways:
- From operating cash flows (MicroStrategy still sells software and services, though this is modest compared to Bitcoin exposure).
- From new debt or equity issuance, which brings in fresh capital.
- From Bitcoin appreciation, allowing Strategy to borrow against or sell Bitcoin at higher prices.
In a sustained downturn, these sources shrink. If Bitcoin falls far enough, Strategy may need to sell Bitcoin to cover obligations. That creates a potential feedback loop: selling pressure pushes Bitcoin down further, which weakens the balance sheet, forcing more selling.
This loop is the key fragility of the model. Unlike a Bitcoin ETF or self-custody, STRC’s stability depends not just on Bitcoin’s long-term direction, but also on Strategy’s ability to continually finance dividends in rough markets.
Data Snapshot (5-Year Simulation)
Starting BTC price: $116,000
| BTC Future Price | Direct BTC | MSTR (leveraged) | STRC (dividends + principal) |
|---|---|---|---|
| $30,000 | –74% | –90%+ | ~+$45k total income |
| $60,000 | –48% | –70% | ~+$45k total income |
| $120,000 | ~0% | ~0% | ~+$45k total income |
| $200,000 | +72% | +152% | ~+$45k total income |
Takeaway:
- STRC looks stable — but only if Strategy can keep paying.
- MSTR swings harder than Bitcoin in both directions.
- ETFs give clean exposure.
- Holding Bitcoin directly gives you full upside with no dilution, but puts security in your hands.
Lessons from History
Financial engineering is not new. Past examples — mortgage-backed securities (2008) or structured notes in Europe (2010s) — looked stable until the underlying assets wobbled.
STRC isn’t a scheme — it’s backed by real Bitcoin. But its yield depends entirely on Bitcoin’s long-term path, and new issuances dilute existing holders
ETF: The “Endgame”?
The arrival of spot Bitcoin ETFs brings institutional legitimacy. For many investors, ETFs will be the endgame: simple, regulated, and transparent.
But for others:
- MSTR → leverage for amplified gains (and amplified risks).
- STRC → yield for those who want Bitcoin-linked income.
- Physical Bitcoin → sovereignty for those who can manage self-custody.
Bottom Line
Strategy’s products are clever financial engineering — not scams, but not free of fragility either. Investors must remember: whether through MSTR, STRC, ETFs, or cold storage wallets, all paths ultimately depend on one factor.
If Bitcoin rises, every version of the strategy shines. If it falls, every version suffers — only in different ways.