ChainThink report, March 14: Michael Saylor, founder of Strategy, posted a simple theory on digital credit:

Acquire substantial appreciating capital (BTC).

Backed by this capital and secured by equity basis, issue credit (STRC).

Monetize a portion of the appreciation—directly or via derivatives (MSTR)—to fund dividends.

Credit investors exchange volatility, risk, duration, and performance with equity investors. Credit (STRC) captures cash flow and stability. Equity (MSTR) amplifies value performance and volatility.

ChainThink note: Strategy, as the largest crypto treasury, holds 738,731 BTC, with a total cost basis of approximately $56.04 billion. MSTR is Strategy’s publicly traded equity listed on U.S. stock exchanges, currently with a market cap of $46.6 billion. STRC is Strategy’s floating-rate perpetual preferred share, positioned as a short-term high-yield credit instrument, priced near $100, with a current annual dividend yield of approximately 11%, paid monthly in cash, and adjusted monthly.

Strategy raises capital through continuous new issuances of STRC to purchase BTC, leveraging the common market perception that the total BTC holding value should be below MSTR’s market cap to inflate the public market valuation, continuing to issue STRC in a self-reinforcing cycle aiming for exponential growth. The internalized leverage magnifies MSTR’s price volatility relative to BTC, effectively serving as a leveraged vehicle for investing in Bitcoin.