Strategy eyes 1 million Bitcoin with aggressive STRC funding mix

Michael Saylor’s Strategy bought 22,337 Bitcoin for about $1.57 billion last week, using a funding mix led by its variable-rate perpetual preferred stock, STRC.

The March 16 announcement showed the company paid an average of $70,194 per Bitcoin in the purchase. The buy lifted Strategy’s holdings to 761,068 Bitcoin, valued at about $56.5 billion at prevailing prices, and ranked among the five largest single-week acquisitions in the company’s history.

The financing mix carried the more important signal. Strategy sold 11.9 million STRC shares during the previous week for about $1.18 billion of proceeds, or roughly 75% of the cash used for the purchase. Another $396 million came from the sale of 2.8 million shares of MSTR Class A common stock.

For most of the past years, investors could read the Strategy model mainly through MSTR. The company sold common stock into a market that valued the shares at a premium to the Bitcoin on its balance sheet, then turned that capital into more Bitcoin.

STRC expands that model by bringing in a different buyer base, one centered on income-oriented investors seeking yield and principal stability rather than only high-beta Bitcoin exposure. The preferred stock pays an annualized dividend of 11.50%, distributed monthly in cash, and is structured to trade near its $100 par value.

The company has therefore widened the pool of capital it can use for Bitcoin purchases. That shift has been evident in the most recent transactions, where preferred stock provided the majority of the funding.

Notably, the prior week pointed in the same direction. Strategy bought 17,994 Bitcoin for $1.28 billion using a similar mix of preferred and common issuance.

Over the two weeks, the company deployed nearly $2.85 billion, with STRC funding most of it. Thus, this pace has turned STRC from a supporting instrument into a principal financing lever.

STRC becomes a larger part of the machine

The speed of STRC’s growth helps explain why the conversation around Strategy has changed.

On Feb. 1, Strategy reported $3.4 billion of STRC notional outstanding, according to the company’s capital tracker. By March 16, that figure had climbed to about $5.02 billion.

This nearly 50% increase in six weeks gave Strategy a larger preferred base to tap at a time when it was accelerating Bitcoin purchases.

Saylor underlined that momentum in a post on X, saying STRC is now the most liquid preferred stock by trading volume, ahead of offerings from Kohlberg Kravis Roberts & Co. and Boeing.

Notably, Strategy also said its Bitcoin per share increased 3.0% in the first two weeks of March, driven by growing demand for STRC.

Adam Livingston, a Bitcoin analyst, argued that the instrument’s scaling could reshape Strategy’s BTC buying power.

According to him:

Livingston’s estimate was based on a conservative scenario. He noted that Strategy raised $1.557 billion from STRC over the last two weeks and said that, even if the company maintained that pace for only 20 of the 41 remaining weeks in the year, it would still raise about $16 billion from STRC alone.

His framework then added the possibility of growth in the preferred program, fuller months of STRC issuance, and additional MSTR sales.

Livingston’s estimate is an outside view rather than company guidance, but the recent funding mix helps explain why it has gained traction.

Strategy now sells common stock for momentum-driven capital and preferred stock for yield-seeking capital, then converts both into Bitcoin. A larger preferred channel means the company can fund additional purchases without relying as heavily on common issuance every time it wants to expand the treasury.

The climb toward 1 million Bitcoin

The accelerated funding mechanism places Strategy on a trajectory to reach 1 million Bitcoin by the end of the year.

From Feb. 1 to March 16, the company added 47,566 Bitcoin, averaging about 1,081 Bitcoin per day.

To reach 1 million Bitcoin by Dec. 31, Strategy would need another 238,932 Bitcoin, which works out to about 824 Bitcoin per day for the rest of the year. The required pace sits below what the company has sustained since early February.

Meanwhile, the cost of that target remains large. At a Bitcoin price of about $73,369, buying 238,932 Bitcoin would require about $17.53 billion. At $85,000 per Bitcoin, the figure rises to about $20.31 billion.

Reaching the 1 million threshold would give MicroStrategy control over 4.76% of Bitcoin’s maximum supply of 21 million coins, an increase from its current 3.62% share.

Following the 2024 halving event, miners are expected to produce only about 130,500 new Bitcoins between mid-March and the end of the year.

To meet its target, Strategy would need to absorb 183% of all newly mined coins during this period, requiring significant purchases from the existing secondary market.

Meanwhile, Rachael Lucas, an analyst at BTC Markets, said the current pace also has implications beyond the 1 million mark.

She said that at Strategy’s recent daily acquisition rate, the company could surpass the estimated 1.1 million Bitcoin attributed to Bitcoin’s pseudonymous creator, Satoshi Nakamoto, as early as March 2027.

In the near term, the company’s pace also puts it on a trajectory to overtake BlackRock’s iShares Bitcoin Trust, the largest Bitcoin fund, which held about 571,700 Bitcoin as of press time.

On current momentum, Strategy’s lead over other corporate holders and large fund vehicles would continue to widen.

The case for 1 million Bitcoin, therefore, rests on more than one large weekly purchase. It rests on whether Strategy can keep raising capital at a rate that supports sustained buying into a market with limited incremental supply.

Premium and payout pressures remain central

Meanwhile, the accumulation strategy faces specific structural and financial vulnerabilities. The model relies entirely on the market valuing the Bitcoin-focused firm’s equity at a premium compared to the underlying BTC on its balance sheet.

Data from Strategy shows that its mNAV stands at 1.18. That premium supports issuance on terms that remain accretive to Bitcoin on a per-share basis.

A sharp compression of this premium, potentially triggered by a decline in Bitcoin prices, rising interest rates, or shifting investor sentiment, would severely restrict the firm’s ability to continue purchasing at the current scale.

Moreover, the reliance on STRC introduces substantial cash obligations. With a notional outstanding amount of $5.02 billion and an annualized rate of 11.50%, the preferred stock generates a cash dividend requirement of approximately $578 million annually, or $48 million per month.

Notably, Strategy has disclosed a $2.25 billion reserve earmarked for preferred dividends and interest on debt.

Still, Jeff Dorman, chief investment officer at Arca, highlighted the long-term solvency concerns tied to the company’s interest expenses.

Dorman stated that the interest coverage ratio is the ultimate determinant of long-term solvency, noting that the firm generates zero earnings before interest and taxes, leaving it without interest coverage.

He also highlighted the growing annual burden of interest and dividend payments, which currently exceed $1 billion, suggesting the firm will eventually exhaust its options to service these obligations.

Considering this, Dorman outlined several potential long-term outcomes for the company. The first scenario involves continuous Bitcoin price appreciation, allowing Strategy to issue equity perpetually to stay afloat. A second path involves the company halting its dividend payments, a move Dorman views as highly logical and certain to end the current accumulation cycle.

In a third scenario, Strategy could sell a portion of its Bitcoin annually to cover payments. Dorman argued this action would immediately destroy the investment narrative surrounding the stock.

However, a fourth possibility entails the company using its Bitcoin to acquire a cash-flowing business to service the debt, transitioning into a BTC-denominated holding company.

Meanwhile, Dorman also noted the possibility of a default if Bitcoin prices crash to levels where the firm’s assets fall below the value of its debt, estimating this threshold around $20,000 per Bitcoin.

Finally, he suggested Bitcoin could evolve into a productive asset, allowing Strategy to earn yield through lending or selling calls to cover its expenses.

Dorman characterized the current structure as a clever arrangement with significant underlying vulnerabilities. He said:

He observed that four distinct stakeholder groups, including BTC holders, MSTR debt holders, the firm’s preferred shareholders, and its common shareholders, currently feel secure in their positions.

However, Dorman concluded that these four groups possess conflicting foundational assumptions.

According to him, while these classes can coexist in the near term, they hold mutually exclusive views on the company’s ultimate financial path, creating a fundamental long-term risk for the corporate structure.