Analysts Reject ‘Death Spiral’ Claims for Strategy

Benchmark and TD Cowen analysts pushed back on recent claims that Strategy (MSTR) faces a “death spiral” of forced bitcoin liquidations, citing the company's cash buffer and the design of its STRC preferred shares. Both firms maintained “buy” recommendations after recent trades.

Benchmark's Mark Palmer wrote that the death-spiral narrative skips steps and assumes the company is a single bad week from large bitcoin sales. Palmer noted Strategy would first use about $1 billion in cash set aside to fund preferred-share distributions before selling meaningful amounts of bitcoin. He added that the perpetual preferreds lack a fixed maturity date that could force accelerated selling.

Strategy disclosed it sold 32 BTC between May 26 and May 31 for roughly $2.5 million, at an average price of $77,135, to fund distributions on its Strategy Variable Rate Perpetual Stretch Preferred Shares (STRC). Shortly afterward the company purchased 1,587 BTC for about $100 million at an average price near $63,024, bringing its total holdings to 846,842 BTC.

TD Cowen analysts Lance Vitanza and Jonnathan Navarrete wrote that STRC dividend obligations should be manageable given the company’s cash reserves and large bitcoin position. The note said, “STRC has materially dampened volatility across drawdowns, offering positive or near-flat returns even during periods when BTC experienced significant declines.” The analysts added that modest further appreciation in bitcoin’s price would support the company’s approach.

STRC is a perpetual preferred share structured to trade near $100 and currently pays a variable monthly dividend that annualizes to about 11.5%. Strategy has used proceeds from STRC issuances to acquire bitcoin. The company moved STRC dividends to a twice-monthly schedule; President and CEO Phong Le said the change was intended to stabilize price, reduce cyclicality, improve liquidity and grow demand.

Bitcoin's market price dropped toward $60,000 in recent sessions before rising above $66,000 within 24 hours. Analysts and investors are monitoring Strategy’s balance of dividend payments and bitcoin purchases to see how the company maintains its treasury and preferred-share payouts.