Strategy on track to reach 1 million BTC this year — with STRC as the most evident factor.

Michael Saylor’s Strategy acquired 22,337 Bitcoin for approximately $1.57 billion last week, utilizing a funding strategy primarily driven by its variable-rate perpetual preferred stock, STRC.

The announcement on March 16 indicated that the company paid an average of $70,194 per Bitcoin during this acquisition. This purchase increased Strategy’s total holdings to 761,068 Bitcoin, valued at around $56.5 billion at current market prices, marking it as one of the five largest single-week purchases in the company’s history.

The financing approach conveyed a significant message. Strategy sold 11.9 million STRC shares the previous week, generating about $1.18 billion in proceeds, which accounted for roughly 75% of the funds used for the acquisition. An additional $396 million was raised from the sale of 2.8 million shares of MSTR Class A common stock.

For much of the past years, investors primarily understood the Strategy model through MSTR. The company sold common stock in a market that valued the shares at a premium compared to the Bitcoin on its balance sheet, subsequently reinvesting that capital into more Bitcoin.

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STRC enhances that model by attracting a different investor demographic, focusing on income-oriented investors seeking yield and principal stability rather than solely high-beta Bitcoin exposure. The preferred stock offers an annualized dividend of 11.50%, paid monthly in cash, and is designed to trade close to its $100 par value.

This development has expanded the capital pool available for Bitcoin acquisitions. This shift has been apparent in the latest transactions, where preferred stock constituted the majority of the funding.

Significantly, the previous week indicated a similar trend. Strategy purchased 17,994 Bitcoin for $1.28 billion using a comparable mix of preferred and common stock issuance.

Over the span of two weeks, the company allocated nearly $2.85 billion, with STRC accounting for most of it. Consequently, this trend has transformed STRC from a supplementary instrument into a primary financing tool.

STRC becomes a larger part of the machine

The rapid growth of STRC elucidates the shift in discussions surrounding Strategy.

On February 1, Strategy reported $3.4 billion of STRC notional outstanding, according to the company’s capital tracker. By March 16, this figure had risen to approximately $5.02 billion.

Strategy’s STRC Market Cap (Source: Bitcoin For Corporations)

This nearly 50% increase over six weeks provided Strategy with a larger preferred base to utilize at a time when it was ramping up Bitcoin purchases.

Saylor emphasized this momentum in a post on X, stating that STRC is now the most liquid preferred stock by trading volume, surpassing offerings from Kohlberg Kravis Roberts & Co. and Boeing.

Additionally, Strategy noted that its Bitcoin per share rose 3.0% in the first two weeks of March, driven by increasing demand for STRC.

Strategy Helps Boost STRC Bitcoin Yield (Source: Strategy)

Adam Livingston, a Bitcoin analyst, suggested that the scaling of this instrument could transform Strategy’s BTC purchasing capacity.

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According to him:

“The growth of STRC will be significant…Strategy could acquire $40 BILLION of Bitcoin this year. For sure.”

Livingston’s projection was based on a conservative scenario. He pointed out that Strategy raised $1.557 billion from STRC over the past two weeks and stated that, even if the company maintained that pace for just 20 of the remaining 41 weeks in the year, it would still accumulate around $16 billion from STRC alone.

His analysis also considered the potential for growth in the preferred program, more months of STRC issuance, and additional MSTR sales.

Livingston’s estimate represents an external perspective rather than company guidance, but the recent funding strategy clarifies why it has gained traction.

Strategy now sells common stock for momentum-driven capital and preferred stock for yield-seeking capital, subsequently converting both into Bitcoin. A larger preferred channel enables the company to finance additional acquisitions without relying as heavily on common stock issuance each time it seeks to expand its treasury.

The climb toward 1 million Bitcoin

The accelerated funding mechanism positions Strategy on a path to achieve 1 million Bitcoin by the end of the year.

From February 1 to March 16, the company added 47,566 Bitcoin, averaging about 1,081 Bitcoin daily.

To reach 1 million Bitcoin by December 31, Strategy would need an additional 238,932 Bitcoin, translating to approximately 824 Bitcoin per day for the remainder of the year. This required pace is below what the company has maintained since early February.

Meanwhile, the financial requirement for that target remains substantial. At a Bitcoin price of around $73,369, acquiring 238,932 Bitcoin would necessitate about $17.53 billion. At $85,000 per Bitcoin, the total rises to approximately $20.31 billion.

Achieving the 1 million milestone would grant 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 projected to produce only about 130,500 new Bitcoins between mid-March and the end of the year.

To meet its goal, Strategy would need to acquire 183% of all newly mined coins during this timeframe, necessitating significant purchases from the existing secondary market.

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

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

In the short term, the company’s pace also positions it to surpass BlackRock’s iShares Bitcoin Trust, the largest Bitcoin fund, which held approximately 571,700 Bitcoin as of the latest report.

With the current momentum, Strategy’s lead over other corporate holders and large fund vehicles would continue to expand.

The case for reaching 1 million Bitcoin, therefore, hinges on more than just one significant weekly purchase. It depends on whether Strategy can continue raising capital at a rate that supports ongoing buying in a market with limited incremental supply.

Premium and payout pressures remain central

Meanwhile, the accumulation strategy encounters 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 indicates that its mNAV stands at 1.18. This premium facilitates issuance on terms that remain accretive to Bitcoin on a per-share basis.

A sharp decline in this premium, potentially triggered by a drop in Bitcoin prices, rising interest rates, or changing investor sentiment, would significantly limit the firm’s capacity to continue purchasing at the current scale.

Furthermore, the dependence on STRC introduces considerable cash obligations. With a notional outstanding amount of $5.02 billion and an annualized rate of 11.50%, the preferred stock incurs a cash dividend requirement of approximately $578 million annually, or $48 million monthly.

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

Infographic titled “The Road to 1 Million” showing MicroStrategy’s Bitcoin funding engine, including capital inflows, STRC strategy, and projected path toward accumulating 1 million BTC.

Nonetheless, Jeff Dorman, chief investment officer at Arca, emphasized the long-term solvency concerns associated with the company’s interest expenses.

Dorman noted that the interest coverage ratio is the ultimate determinant of long-term solvency, pointing out that the firm generates no earnings before interest and taxes, leaving it without interest coverage.

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

In light of this, Dorman outlined several potential long-term scenarios for the company. The first scenario involves ongoing Bitcoin price appreciation, enabling Strategy to issue equity indefinitely to remain viable. A second path entails the company ceasing its dividend payments, a move Dorman considers highly logical and likely to conclude the current accumulation cycle.

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

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

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

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

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

“As I’ve always said, there are no covenants in the debt that force MSTR to sell the BTC (forced selling is not a risk)… but voluntary selling to cover interest & dividend payments is a real risk. And if you don’t believe he will ever do that, then you have to recognize that he will eventually stop the dividend.”

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 trajectory, creating a fundamental long-term risk for the corporate structure.

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