Previous Article, we introduced how Strategy brought new marginal buying pressure to Bitcoin through STRC.
However, two events during the new dividend cycle have made some traders uneasy about the "supply-demand dynamic new paradigm" that STRC brings to Bitcoin.
Saylor Backtracks
After-hours on May 5th, during MicroStrategy's Q1 2026 earnings call, Saylor publicly acknowledged for the first time that the company might sell some Bitcoin to pay dividends.
There are three possible interpretations of Saylor's statement.
The first interpretation is that Saylor is trying to let the market know in advance and digest this possibility to avoid a severe reaction if it actually happens. This is a "PR" move to provide price cushioning for BTC.
The second interpretation is straightforward: Saylor's "never sell Bitcoin" commitment supports the MSTR premium and the entire Bitcoin treasury narrative. Once Saylor himself opens a loophole, the market will reassess the stability of the entire system.
The third interpretation is that MicroStrategy's previous financing relied mainly on two tools, issuing MSTR common stock and issuing convertible bonds. Preferred shares have only recently become mainstream in the past year, but the issuance ceiling is still limited by the secondary market's ability to absorb them. The only tool left that can create future obligations without diluting the per-share BTC content is the ATM issuance of MSTR common stock. The problem is that MSTR's mNAV needs to be at least 1.22 times for new common stock issuance not to dilute the per-share BTC content, and the current MSTR's mNAV is not far from this threshold. Saylor attracted market attention in a relatively mild way by mentioning the "potential to sell Bitcoin," making the relative cost of continuing to issue MSTR common stock seem more acceptable.
From the balance sheet perspective, MicroStrategy's total annual dividends and interest for the current year amount to approximately $1.5 billion, with monthly dividends and interest around $125 million. Of this, STRC accounts for about $978 million, or 65%. As of Q1 this year, the company has about $2.25 billion in USD reserves, which, according to management, can cover 18 months of dividend payments.
If STRC issuance stagnates, advanced reserves are exhausted, and only selling BTC remains to pay dividends. Assuming an $80k BTC price, annual dividend and interest payments of $1.5 billion, Strategy would need to sell about 18,519 BTC per year, equivalent to 2.3% of the total position.
As long as BTC appreciates by at least 2.3% annually, this sell-off can be absorbed and neutralized by the position's appreciation. Looking at it from a multi-year perspective, BTC's compound annual return is usually in the double or even triple digits, so 2.3% is hardly a constraint.
However, BTC has experienced single-year drawdowns of -77% in 2018 and -65% in 2022. If the Strategy were to sell off 2.3% of its BTC position at the bottom, the company's balance sheet would deteriorate significantly.
MicroStrategy has net purchased approximately 77,000 BTC through STRC as of 2026. In a scenario where a coin sale is triggered and BTC falls back to around Strategy's average cost of 75,537, a 2.3% sell-off of the total position would equate to 25% of this year's incremental purchase.
In other words, Saylor's one year of selling could offset four months of buying.
STRC "Softness"
In March's ex-dividend period, STRC remained above $100 for 13 days before the ex-dividend date, during which 3.42 million shares were traded, equivalent to around 22,000 BTC bought. In April's ex-dividend period, approximately 47,000 buying pressure was observed for STRC.
With only 5 trading days left until the May 15th ex-dividend date, in May's ex-dividend period, STRC has not returned to a $100 face value, indicating zero BTC purchases.
To understand why this ex-dividend period suddenly deviates, the buyers of STRC can be divided into four categories:
· The first category includes arbitrageurs who enter in the days leading up to the ex-dividend date. They buy STRC before the ex-dividend date and sell after benefiting from the dividend. The peak trading volume on the ex-dividend date mainly comes from these funds, and their sell orders are the primary driving force behind the post-ex-dividend price drop for STRC.
· The second category comprises arbitrageurs who enter after the ex-dividend date. STRC usually drops to the 99.20 to 99.50 range after the ex-dividend date. They buy and place sell orders around 99.95 to 99.99, waiting for STRC to return to face value. These funds can profit without waiting for STRC to truly return to 100; their sell walls are the fundamental reason for STRC repeatedly hovering below face value.
· The third category consists of medium to long-term holders who view STRC as a financial product. They do not actively arbitrage but may redeem small amounts when needed. These sporadic sell orders, combined with the second category traders, create a price range with limit orders around $100.
· The fourth type of participant is a true long-term holder who will not sell. Their behavior has little impact on the price dynamics during each dividend cycle.
If the source of funds that caused the STRC issuance is arbitrage traders, the entire market's behavior will tilt towards "selling near the $100 face value."
This is what happened last month.
In March and April, Strategy raised nearly $5 billion through STRC, and the influx of funds at this scale could only have come from arbitrageurs because long-term holders would not suddenly increase this much.
This also resulted in arbitrage selling pressure in April being stronger than ever before.
Strong selling pressure means that the drop in STRC after the April dividend date was deeper than ever before, and the return to the $100 face value was slower than ever before. A significant portion of the first type of funds did not have time to exit and were trapped at the bottom. This portion of funds that suffered losses may not participate in arbitrage in May.
In addition, the external environment is changing.
The S&P 500 continues to hit new highs, altering the opportunity cost for fixed-income funds to purchase STRC, especially since many sectors of the U.S. stock market can achieve daily gains higher than STRC's annual return rate (11.5%).
The Strategy management team has anticipated this issue and submitted an amendment on April 17 to pay out STRC dividends twice a month. Bi-monthly dividends can reduce the drop on each dividend date and distribute the arbitrage gains. However, this amendment will not take effect until July 15, and the dividend date next week will still follow the monthly rule.
Reverse Flywheel
The previous article discussed the Strategy's flywheel: money invested in STRC is leveraged three times to flow into BTC, BTC's rise improves the collateral quality of STRC, and more funds flow into STRC. Each cycle pushes the next one higher.
What if the flywheel turns in the opposite direction?
If STRC cannot return to face value, the Strategy's At-The-Money (ATM) issuance window closes, no new cash purchases BTC, BTC loses marginal buying pressure, prices come under pressure, STRC's collateral base weakens, fixed-income investors demand a higher credit spread. As the spread widens, either MicroStrategy increases the dividend rate to increase interest expenses, or investors continue to sell STRC, making it harder for the price to return to the $100 face value.
Each link in the chain drives the next one lower.
Saylor's comment about "possibly selling some BTC" is essentially an advance pricing of the end of this reverse cycle.
In specific numbers: In April, Strategy made a net purchase of about $4.1 billion worth of BTC through STRC. If the May issuance of STRC falls to the $1 billion range and the BTC appreciation does not reach the critical threshold of 2.3%, Strategy will initiate a sell-off to pay interest plan. The monthly net contribution could plummet from $4.1 billion to just a few billion dollars, a contraction of over 90%.
The market's thesis of "buying pressure from STRC" as the bottom support for BTC over the past few months will be disproven, and the price of BTC will face a sharp correction.
It must be acknowledged that this is just one possible scenario. If STRC successfully returns to $100 next week with a significant issuance, all previous concerns will be postponed.
Bullish Signals
During pre-market trading on May 8th, STRC saw the first issuance of this round's dividend cycle, corresponding to a purchase of 0.4 BTC.
The absolute scale is insignificant, but the significance lies in the transition from zero to one.
Meanwhile, Coinbase's premium briefly turned positive and returned to April levels.
Whether BTC, which seems to be losing upward momentum, will fall back to the range of February or make a push towards $90,000, the performance of STRC next week will play a crucial role.
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