Bitcoin (BTC) fell below $60,000, currently trading at $59,900 with a decline of 2.76% in the last 24 hours, adding to the overall stress on the cryptocurrency market, with investors increasingly concerned about the sustainability of Strategy’s Bitcoin financing model.
At the center of the concern is Strategy’s sustained policy of raising funds by means of common shares, preferred stock, and other securities and using those funds to buy Bitcoin. This model helped the company to build one of the largest corporate Bitcoin treasuries, but falling crypto prices and rising financing costs are now testing its durability.
Strategy’s preferred stock, STRC, has become a key pressure point. The product's objective was to attract investors looking for monthly dividend payments while also supporting the company's Bitcoin acquisition strategy. But STRC has tumbled from $100 to around $75, leaving several investors with unrealized losses.
The yield on STRC has continued to increase as demand has weakened, which could increase the cost of capital for Strategy going forward. This could lead to lower buying capacity for Bitcoin, which could impact the company's institutional demand.
Alex Blume, Founder and CEO of Bitcoin asset management firm Two Prime, said that Strategy's recent downtrend is reminding investors of the past corrections. “The recurring issues at Strategy are unsettling the market and evoking memories of previous major crises in the cryptocurrency space.”
Also Read: What are STRK, STRC and More? A Complete Guide to Strategy’s Products
Investors have been concerned since Strategy revealed it had sold its first Bitcoin since 2022, 32 Bitcoins. The sale was fairly modest in comparison to the company's holdings, but it was an attack on the ‘never sell Bitcoin’ policy of the company's founder, Michael Saylor, and an important wake-up call for investors re-evaluating financing assumptions.
Analysts commented that STRC is not a traditional bond. It doesn't have a set maturity date, is not secured by Bitcoin collateral, and the dividends may be lowered or terminated by the board. This makes the risk higher than many income-focused investors may have initially expected.
Head of Derivatives Trading at Amina Bank, Andrejica Cobeljic, explained that the recent pullback of Bitcoin was influenced by cyclical weakness, but most importantly, it was a result of fading confidence in Strategy's model. “The immediate trigger for this leg of Bitcoin’s decline is weakening market cycles, but the deeper underlying force is the erosion of credibility in Strategy’s approach.”
While retail participation continues to cool and institutional demand for Bitcoin slows, the sentiment shift below $60,000 shows that market confidence now depends not only on price action but also on the vitality of Strategy's financing engine.