Bitcoin continues to weaken! The funding model of Strategy (MSTR.US) is questioned by the market, with preferred shares plummeting to a new low since listing.

Bitcoin prices continue to weaken, with market analysts believing that this round of decline is not only influenced by the expectation of a rate hike by the Federal Reserve, but also related to the pressure faced by the world's largest corporate Bitcoin holder, Strategy (MSTR.US), in its financing model. Investors are beginning to worry about its ability to continue buying Bitcoin. As of Thursday, Bitcoin fell by 3.4% to around $62,184 during intraday trading. Since hitting a historic high in October 2024, Bitcoin has cumulatively fallen by nearly 50%. Two weeks ago, Bitcoin fell below the $60,000 integer mark for the first time since the end of 2024. The recent market focus has been on the Stretch Preferred Shares (STRC.US) used by Strategy to finance the purchase of Bitcoin. As the price of STRC remains consistently below the $100 face value, Strategy's model of financing purchases of Bitcoin through the issuance of this product is facing increasing pressure. It is understood that the operation mode of STRC is for Strategy to issue preferred shares with a face value of $100 per share, raise funds immediately after issuance to increase its holdings of Bitcoin, and investors receive double-digit annual dividend returns. However, since the ex-dividend date of May 15th, the price of STRC has consistently remained below the $100 face value level. With the stock price trading at a discount, the company's actual financing costs continue to rise, equivalent to raising funds at a higher yield. On Thursday, the price of STRC fell below $83, reaching a new low since listing. Market concerns revolve around the fact that if STRC continues to trade significantly below face value, Strategy may struggle in the future to raise funds to purchase Bitcoin through the issuance of preferred shares, and its long-term "buy and hold" strategy may face challenges. Joshua Lim, Co-Head of Global Markets at FalconX, stated, "Everyone is currently focused on the price of STRC as it has become an important indicator of market pressure on Strategy. The market is testing whether the company will continue to insist on buying Bitcoin or choose to sell some of its holdings to supplement its cash reserves and maintain preferred stock dividends." Earlier this month, the move by Strategy's founder and chairman, Michael Saylor, to sell a small amount of Bitcoin further intensified market concerns. Saylor has long been seen as one of the most staunch supporters of the "never sell Bitcoin" philosophy. However, his small-scale reduction earlier this month was seen by some investors as a potential signal of a change in direction, leading to speculation about Strategy's financial situation in the market. At the same time, prospects of Federal Reserve policy have also added pressure to the cryptocurrency market. This week, Federal Reserve Chairman Kevin Wash signaled a hawkish stance following the first monetary policy meeting, with several officials expecting the possibility of a rate hike by the end of this year. Expectations for high or even further rising interest rates have quickly increased, putting pressure on overall risk assets. Joshua Lim stated, "In addition to the issues faced by Strategy, the market is also concerned about how rising interest rates will affect Bitcoin and other risk assets, creating a quite challenging market environment." Cryptocurrency trading institution QCP Capital pointed out that the weak market performance is partially due to investor concerns that Strategy may need to sell more Bitcoin to pay preferred stock dividends in the future. Especially after the company repurchased $1.5 billion of 2029 convertible bonds, this concern has further intensified. Jeff Dorman, Chief Investment Officer of Arca, believes that Strategy may eventually have to take action to restore market confidence. He said that the company may have to sell "a large amount" of Bitcoin or common stock to support STRC prices returning to near the face value, otherwise, the market will continue to be concerned about the uncertainty of its capital structure. "Otherwise, investors will continue to watch as its entire capital structure is under pressure due to uncertainty." Affected by these concerns, Strategy's stock price fell by 3.46% on Thursday, with a cumulative decline of about 14% since the close of Monday this week. Over the past year, the company's stock price has accumulated a decrease of nearly 70%. Against the backdrop of expectations of a hawkish Federal Reserve policy, rising US Treasury yields, and market questioning of Strategy's financing model, Bitcoin still faces significant pressure in the short term. The future focus of the market will be on whether Strategy will adjust its financing and buying strategies, and whether Bitcoin can hold the key psychological level of $60,000.