Selling coins despite a loss of 55 million dollars, the faith in Strategy has reached the interest payment date

Author: Deep Tide TechFlow

On July 6, Michael Saylor posted a tweet on X that was completely contrary to his persona over the past six years: Strategy sold 3,588 BTC, cashing out approximately $216 million to pay dividends on digital credit securities. As of July 5, the company still held 843,775 BTC and $2.55 billion in cash reserves.

This transaction occurred between June 29 and July 5, with an average price of $60,197. Strategy's previous average holding cost was $75,651. In other words, this was a loss of over $15,000 per coin, totaling an realized loss of about $55.45 million. The Saylor who once said "never sell coins" and "Bitcoin is an exit, not an entry" chose to sell at a loss as the price approached a cyclical low.

To understand this, we need to answer two questions: Why did he have to sell? How long will this selling of coins continue?

From 32 coins to 3,588 coins in just 35 days

Let's rewind to the end of May.

From May 26 to May 31, Strategy sold 32 BTC for a total of about $2.5 million, marking the company's first sale since 2022. The 32 coins accounted for 0.004% of the total holdings, which was financially insignificant. At that time, the market generally interpreted it as a "desensitization test": Saylor was testing how painful it would be for the market when selling coins occurred.

The answer was indeed very painful. The news combined with macro pressures led Bitcoin to briefly drop below $61,000 on June 5, setting a new low since February. Strategy's perpetual preferred stock STRC fell to a historic low of $73.77 on June 25, a discount of over 26% from its $100 par value; MSTR common stock also fell below $90 on the same day, down nearly 80% from its peak, deeper than Bitcoin's approximately 50% decline during the same period.

The real turning point came on June 30.

Strategy's board approved a package plan: authorizing the sale of up to $1.25 billion in Bitcoin, with proceeds only to be used for repurchasing securities, paying dividend interest, or replenishing dollar reserves; establishing a $2.55 billion dollar reserve to cover 17.4 months of annual obligations; launching a $2 billion dual-track repurchase plan; and raising the annual dividend rate of STRC to 12% starting July 1.

This announcement effectively transformed "selling coins to pay interest" from a taboo into a part of the company's bylaws. Five days later, the sale order for 3,588 BTC was executed. From a desensitization test to a routine operation, Strategy took only 35 days.

Flywheel reversal: According to Saylor's own formula, selling coins is the optimal solution

The growth engine of Strategy over the past six years has been a flywheel dependent on premiums: as long as MSTR's market value is significantly higher than its Bitcoin net asset value (i.e., mNAV greater than 1), the company can issue new shares to finance Bitcoin purchases, increasing the Bitcoin content per share, which in turn drives up the stock price, supporting the next round of issuance. In a bull market, this flywheel was sharp enough that MSTR's trading volume once exceeded that of Nvidia.

During this year's first-quarter earnings call, management set a critical value for this flywheel: 1.22 times mNAV. A premium above 1.22 times makes issuing new shares to buy Bitcoin worthwhile; falling below 1.22 times means issuing common stock is a net harm to existing shareholders, at which point selling Bitcoin to pay interest or repurchase is a better choice to increase the Bitcoin content per share.

Now all three teeth of the flywheel are jammed.

The first financing channel, STRC, was designed to dynamically adjust the dividend rate to anchor the price around the $100 par value for continuous fundraising at par. When the secondary market only requires $75 to buy the same STRC, no one will subscribe for new shares at $100, effectively closing the preferred stock financing channel. The 90-day correlation between STRC and Bitcoin has risen to around 0.70, a historical high, and the stability sought by income investors is also dissipating.

The second channel, common stock ATM, dilutes faith with every share issued when mNAV is close to the critical value.

The third channel, convertible bonds, with $8.2 billion in outstanding debt maturing gradually from 2028, will only compress future maneuvering space if more debt is added.

With all three financing routes blocked, the bills on the expenditure side are rigid.

The five series of preferred stocks issued by Strategy (STRF, STRE, STRK, STRD, STRC) correspond to annual dividend and interest obligations of about $1.7 billion to $1.76 billion, with STRC alone, based on an issuance scale of about $10.5 billion and a 12% dividend rate, resulting in annual expenditures exceeding $1.2 billion. Preferred stock dividends can be legally delayed, but once missed, the penalty interest rate and loss of credit reputation will directly destroy all future financing capabilities. For a company reliant on capital market blood transfusions, this money is no different from debt interest.

Thus, the true nature of this coin sale is: within the rules set by Saylor himself, this is a rational solution under the current constraints, perhaps even the only solution. When the market is willing to give a premium, he has securitized faith and sold it to income investors; when the premium disappears, the securitized faith begins to accrue interest, and the interest can only be paid in Bitcoin.

The world's largest buyer has become a seller with a timetable

The subsequent impact can be unfolded along three lines.

For the Bitcoin market, this is a historic switch in the buy-sell order structure. Strategy holds about 840,000 BTC, accounting for 4% of the total supply, and over the past six years, it has been the most stable and price-insensitive marginal buyer in this market. Roughly estimating at the current price of about $60,000, if the $1.76 billion annual obligation is fully covered by selling coins, it corresponds to a selling pressure of about 29,000 BTC per year, averaging about 2,400 coins per month. This volume is not fatal relative to the daily trading of spot ETFs; what is truly fatal is the expectation: the market now knows that at the end of each quarter and each month, there may be a sell order waiting that does not consider the price. Once a faith anchor, it has turned into a looming timetable.

For the DAT (Digital Asset Treasury) sector, Strategy is the valuation anchor for all imitators. When the original creator starts selling coins to pay interest, dozens of companies using the same template to issue preferred stocks and buy BTC or ETH will have to reassess the rationality of their mNAV premiums. The credit spreads in this sector are likely to widen systematically.

For Strategy itself, the situation is not as desperate as the emotional rendering suggests. The $2.55 billion cash reserve can cover about 17 months of obligations, with debt concentrated to mature after 2028. Analysts' stress tests show that even in extreme scenarios where the coin price is halved and the capital market is closed, the main risk is the continuous compression of Bitcoin content per share, rather than an immediate liquidation spiral. Its essential difference from a LUNA-style death spiral is that preferred stock dividends will not automatically trigger additional issuance, and holders have a priority claim on the 840,000 BTC during liquidation. Strategy will not die suddenly, but it may fall into a more faith-draining state, having to choose a less bad answer between "selling stock" and "selling coins" every month.

There is only one breaking point: STRC must return to around the $100 par value for the preferred stock financing channel to reopen, allowing the flywheel to turn positively. The prerequisite for STRC to re-anchor is likely that the Bitcoin price stabilizes and rises first.

In other words, Strategy has made its fate a circular argument: When the coin price is good, everything works; when the coin price is bad, the model itself puts pressure on the coin price.