Will preferred shares hit new lows first, and can the strategy trigger a reverse feedback loop?
Written by: ChandlerZ, Foresight News
On June 25, Bitcoin officially fell below the $60,000 level; during the day it even touched a low of $58,030, the lowest since October 2024. ETH also dropped to $1,519, SOL was at $65.99, and major assets were under broad pressure.
Coinglass data shows that in the past 24 hours, more than $1 billion in leveraged positions were liquidated, with longs accounting for $788 million. The Fear and Greed Index fell to 15, entering an extreme fear zone.
With the distance from the all-time high of $126,198 set in October 2025 at over 53% drawdown, Bitcoin has been in a bear market that has now extended to the 8th month.
In the bullish logic for Bitcoin over the past two years, there are two key pillars: first, the DAT-company flywheel model led by Strategy, which has been continuously buying Bitcoin through securities financing; second, the massive inflow of institutional capital brought by the launch of U.S. spot ETFs. Together, these two channels formed the demand base for Bitcoin’s previous bull cycle. The current problem, however, is that both pillars are loosening at the same time.
Strategy’s funding flywheel keeps stalling
In this selloff, the variable most worth watching is Strategy, the world’s largest corporate Bitcoin holder.
As of June 21, Strategy held 847,363 Bitcoins, with an average cost of about $75,651. Based on the current price, it is sitting on an unrealized loss of more than $14.6 billion. In recent years, the company’s core strategy has been to finance through the issuance of stock and preferred shares, and then continuously buy Bitcoin. This cycle—“issue securities, buy Bitcoin, push up the coin price, support the stock price, then issue securities again”—has made it one of the most stable institutional sources of buying in the Bitcoin market, and helped MSTR’s share price briefly break above $457 in 2024.
But the key gear in this flywheel is starting to slip. In July 2025, Strategy issued variable-rate preferred stock STRC via a $2.5 billion IPO. The design goal is to anchor trading at a par value of $100. The company can adjust the dividend rate monthly to maintain the anchor. STRC is positioned as a financing product for the mass market, aiming to attract retail investors to indirectly participate in Bitcoin investment with lower volatility.
But since STRC’s listing, it has continued to weaken. On June 25 it fell to around $75, a historic low, representing a 25% discount to par value. Per the terms, if STRC drops below $95, an automatic step-up in interest of 0.5% is triggered. The current annualized dividend rate has already risen to about 11.5%, increasing annual dividend payments by roughly $53 million. The company’s cash reserves are about $1.4 billion—enough to cover a little more than a year of dividend payments.
Andreja Cobeljic, head of derivatives trading at Amina Bank, analyzed that the immediate cause of this Bitcoin selloff is weakness in the market cycle. But the deeper driving force is that Strategy’s strategic credibility has been hit. If STRC continues to be unable to return to par value, Strategy’s ability to raise funds and buy Bitcoin through this channel will be significantly weakened. The most important incremental source of institutional capital in the past two years for the Bitcoin market could then be cut off.
Starting from current data, analyst Adam Livingston ran a three-year stress test on MSTR. He simulated an extreme scenario in which Bitcoin drops 55% to $26,611 in the sixth month, while the capital markets are completely shut—meaning Strategy cannot issue new shares or new debt, and cannot continue buying Bitcoin.
Under this scenario, Strategy’s senior debt structure would quickly become lethal. Both preferred stock and bonds are fixed-dollar claims; when the coin price collapses, the number of BTC they translate into would balloon sharply. The model shows that the BTC-equivalent claims of senior debt jump from 350,000 coins to 819,000 coins, accounting for 96.7% of total holdings—almost swallowing the entire Bitcoin inventory. Equity left for common shareholders shrinks from 496,000 shares to just 28,000, and the simulated MSTR share price falls to $1.01. Meanwhile, fixed monthly outflows of $167.7 million (preferred-share dividends plus debt interest) continue to burn cash; by month 9, cash runs out and the company is forced to begin selling Bitcoin to keep the debt functioning, with a total of about 116,000 coins sold over three years.
But the model’s conclusion is that Strategy lives through it. If Bitcoin rebounds to $48,498 after three years, the company would still hold 732,000 BTC; the MSTR share price would return to $51.86, and mNAV would recover to 1.40x. Livingston’s view is that the real risk is not the “immediate bankruptcy” that bears keep calling for, but rather that when the coin price crashes, senior debt balloons when denominated in BTC, temporarily swallowing almost all common-share equity. However, the model ultimately does not arrive at a “death spiral.”
Institutional retreat, tighter macro conditions, and funds shifting to AI
Strategy’s problem sits within a bigger picture of capital retreat.
On June 24, U.S. spot Bitcoin ETFs recorded net outflows of $469 million. BlackRock’s IBIT accounted for $239 million, marking the fifth consecutive trading day of net outflows. Across the entire month of June, total net outflows were roughly $2.8 billion to $3.5 billion, the most severe ongoing capital exodus since the product was approved in January 2024.
Bloomberg ETF analyst Eric Balchunas recently said the market should not view Bitcoin’s overreliance on ETF and the Strategy (MSTR) narrative as the main storyline for Bitcoin’s value. He believes the two should be icing on the cake, not the whole cake itself. When Strategy’s buying slows and the ETF channel is simultaneously losing steam, the demand side of Bitcoin lacks the two most critical incremental sources.
Old money is moving out, and new money still can’t come in; the macro environment remains tightening. The May PCE price index released on June 25 rose 4.1% year over year, the fastest pace in more than three years. The Federal Reserve kept interest rates unchanged at 3.50% to 3.75%, and expectations for rate cuts within the year were pushed back further. On the same day, U.S. stocks initially rose then fell. Apple announced global price increases for multiple product lines (up to $300) due to a shortage of storage chips, and its stock plunged 5.1%, dragging the Nasdaq from a 2.1% intraday gain to a drop of more than 1%. Persistently high inflation implies borrowing costs remain elevated, directly weighing on crypto assets that rely on liquidity expectations.
Deutsche Bank pointed out that the key difference between this downturn and previous cycles is that retail incremental buying has nearly dried up, while institutional capital is shifting massively toward AI. On June 25, as Bitcoin fell below $60,000 and Apple took a sharp hit, the storage-chip sector surged across the board. Micron rose 8.6%, SanDisk rose 10.6%, and SK Hynix briefly jumped more than 10% due to its plans to list in the U.S. Capital made a directional choice between AI infrastructure and crypto assets.
Capital outflows, a lack of new buying, and macro pressure—all converging within the same week—create a concentrated hit to the $60,000 support level.
An options expiry worth billions of dollars today could keep volatility going
Beyond the above-mentioned pressure, on June 26 there is another immediate catalyst: Deribit will see the expiry of Bitcoin options with a notional value of about $10 billion, accounting for roughly 37% of the current open interest. The put-to-call ratio is 0.83, indicating that bullish positioning still dominates. However, most call options are already out of the money, while put options are concentrated in the $60,000–$65,000 and $70,000–$75,000 ranges, suggesting bearish bets are more likely to be profitable.
Deribit Chief Business Officer Jean-David Pequignot said this is an options portfolio built for a mid-term high-price environment. It is now facing the test of a decline in spot prices.
Adam Haeems, head of asset management at Tesseract Group, noted that liquidity is weak at quarter-end, so price action may overshoot in either direction first, then revert to the mean after market makers complete their hedging and closing positions. But the more important test will come in the first week of July, after the quarterly contract settlement and after leverage is reduced.