NYDIG says Strategy’s rapidly expanding STRC issuance has become a useful new source of growing demand for Bitcoin, but argues that the structure is widely misunderstood. In a March 20 research note, the company said the preferred equity pool around the strategy and similar tools like Strive’s SATA should be viewed less as a traditional institutional credit and more as a managed, bitcoin-backed liability system whose viability depends on access to capital markets and investor confidence.
This distinction is important because the last purchase of Bitcoin was made by the strategy They have increasingly been financed through preferred stock And not through the tools that most investors traditionally associate with the company. According to NYDIG, Strategy issued nearly $1.2 billion worth of STRC over the past week alone, bringing the total STRC outstanding to just over $5 billion. Combined with another $5 billion of preferred stock, the company’s total preferred equity capital now exceeds $10 billion, and has exceeded convertible debt in its capital structure.
NYDIG Breaks Down Bitcoin’s Flywheel
NYDIG’s main point is that STRC and SATA “are not well understood through a traditional credit or equity lens.” Instead, the company wrote, “they are best viewed as actively managed liability structures that rely on capital markets and are backed by a reserve asset, Bitcoin.” This frame runs through the entire note.
the a report He argues that these securities are materially different from traditional debt. It ranks lower than debt but higher than common stock, is unsecured, and comes with variable, fully discretionary dividends and limited governance rights. Most importantly, NYDIG says issuers actively try to keep them trading close to the rate, typically around $100, through signals, earnings management and periodic adjustments to earnings rates.
From NYDIG’s perspective, this means that the real constraint is not operating cash flow. “These instruments are not funded by operating cash flow, nor are they designed to be serviced by corporate earnings,” the company wrote. “Instead, they function as capital markets instruments where preferred securities are the primary financing product, and corporate balance sheets, anchored by Bitcoin holdings, are created to support ongoing issuance.” In this setting, traditional metrics such as EBITDA coverage are not the right tool to judge sustainability.
The note also disputes the idea that a decline in Bitcoin will automatically force liquidations across the structure. Strategy debt is generally unsecured and carries limited financial covenants unless explicitly specified, NYDIG says. Defaults “cause primarily from payment failure or bankruptcy, not from market declines in the value of assets,” and this logic extends in important ways to the favored class as well. There are no strong catalysts directly tied to Bitcoin price movements or coverage ratios, even if preferred holders remain more exposed to management discretion and dependency risk.
This leads to a “flywheel” in the center of the report. when Preferred like STRC With SATA trading close to par, exporters can raise capital efficiently. This capital is then used to purchase bitcoin, expand the asset base, and bolster the balance sheet, NYDIG says. If the common stock also trades above its net asset value, Issuing shares It becomes accretive on a bitcoin per share basis, reinforcing the cycle.
NYDIG describes it as a reversal loop where “access to capital funds Bitcoin purchases, strengthening the balance sheet and maintaining investor confidence, allowing issuance to continue.” But it also emphasizes that the mechanism is conditional and not permanent. “As long as preferences remain fixed near par, stocks trade above net asset value, and capital markets remain open, the flywheel drives continued demand for bitcoin,” the report said.
The opposite is also true. If the price of Bitcoin declines, confidence weakens, or favorability falls below the level, issuance becomes more difficult or uneconomical. This can lead to system disruption without the need for insolvency. The burden of adjustment then shifts toward the preferred tier through deferral of dividends, price changes, or deeper subordination when new claims are added, NYDIG says.
The company even frames STRC through an options lens, saying it’s similar to a short position on a hedge on bitcoin assets, with the return being realized for downside risk if bitcoin weakens and the asset cushion is eroded. But unlike a standard option, there is no fixed strike or maturity, and results depend heavily on management decisions.
At press time, Bitcoin was trading at $70,885.
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