STRC, the preferred stock issued by Strategy (formerly MicroStrategy) to raise capital for Bitcoin purchases, crashed 17% to $82.53 on Friday, breaking below its $100 par value for the first time. The drop marks the first real stress test for digital credit — a class of income-generating securities backed by Bitcoin that's less than a year old. STRC pays a high variable yield near 12%, but the slide below par signals investors are losing confidence in the asset.
How STRC works and why it's under pressure
STRC is designed to trade near $100. Falling below that is a red flag. Strategy uses the proceeds to buy Bitcoin, and STRC's yield is funded by the company's cash flows and, if needed, by selling Bitcoin. In late May, Strategy sold a small batch of Bitcoin to cover STRC distributions for the first time — a move that spooked some holders. Founder Michael Saylor has said he designed STRC with ChatGPT, but the market's reaction suggests the structure may be showing cracks. Rival treasury preferreds with higher yields have pulled capital away from STRC, compounding the selloff.
The broader market squeeze
The STRC crash isn't happening in a vacuum. Total value locked across DeFi has plunged from about $170 billion in October 2025 to near $72 billion — a drop of more than 55%. Meanwhile, the Bitcoin network activity index broke above its long-term trend despite the price slide, reaching multi-year highs. That's a weird divergence. Capital that once flowed into STRC-linked buying — which funded far more Bitcoin than spot ETFs over 2025-2026 — is now competing with a flood of AI listings and a busy IPO pipeline. Leveraged STRC positions are unwinding fast, adding downward pressure.
Strategy's cushion and the risk of failure
Despite the selloff, Strategy isn't in immediate danger. The company holds enough cash to cover STRC dividends for at least seven months, and its massive Bitcoin reserve could fund payments for decades. Analyst @therationalroot argues that a failure is very unlikely. But the market is pricing in risk. With digital credit less than a year old, there's no track record to guide investors. The question is whether STRC can stabilize above its liquidation triggers — or whether this stress test becomes a full-blown crisis for the new asset class.
The next few weeks will show whether STRC can recover or if the capital flight to higher-yielding alternatives continues. For now, the digital credit experiment is facing its first real exam.
