In the previous article, we introduced how Strategy brings new marginal buying pressure to Bitcoin through STRC.

However, two events that occurred during the new dividend cycle have caused some traders to feel uneasy about the "new paradigm of supply and demand dynamics" that STRC brings to Bitcoin.

Saylor exits

After hours on May 5, during MicroStrategy's Q1 2026 earnings call, Saylor publicly acknowledged for the first time that the company may sell a portion of its Bitcoin to pay dividends.

Saylor's statement can be interpreted in three ways.

The first interpretation is that Saylor is trying to avoid a sharp market reaction when it actually happens by letting the market know and absorb the possibility in advance. This is a PR move to provide a price buffer for BTC.

The second interpretation is straightforward: Saylor’s promise to “never sell” is the foundation supporting the premium of MSTR and the entire narrative of Bitcoin as a treasury asset. Once Saylor himself creates a crack in this promise, the market will reassess the stability of the entire system.

A third interpretation: MicroStrategy’s previous financing primarily relied on two instruments—issuing common MSTR shares and convertible bonds. Preferred shares have only recently become the main tool, but their issuance ceiling remains constrained by the secondary market’s capacity to absorb them. The only tool capable of raising substantial funds without creating future obligations is the ATM (at-the-market) issuance of MSTR common shares. The issue is that new common shares will not dilute BTC per share only if MSTR’s mNAV exceeds 1.22 times; currently, MSTR’s mNAV is not far from this threshold. Saylor has used the relatively mild phrasing of “possibly selling Bitcoin” to draw market attention, making the relative cost of continuing MSTR common share issuance appear more acceptable.

From the balance sheet, MicroStrategy’s total dividends and interest for the current fiscal year amount to approximately $1.5 billion, or about $125 million per month. Of this, STRC accounts for approximately $978 million, or 65%. As of Q1 this year, the company held approximately $2.25 billion in U.S. dollar reserves, which, according to management, can cover 18 months of dividend payments.

If STRC issuance stalls and the advanced reserves are depleted, the only remaining option will be to sell BTC to repay dividends. At a BTC price of $80,000 and annual interest and dividend payments of $1.5 billion, Strategy would need to sell approximately 18,519 BTC per year, equivalent to 2.3% of its total position.

As long as BTC appreciates by at least 2.3% annually, this sell pressure can be absorbed by position appreciation. Over a multi-year horizon, BTC’s compound annual return typically reaches double or even triple digits, making 2.3% almost negligible.

However, BTC has experienced single-year drawdowns of -77% in 2018 and -65% in 2022. If the Strategy sells 2.3% of its BTC position at the bottom, the company’s balance sheet would be severely impaired.

MicroStrategy has net purchased approximately 77,000 BTC through STRC since 2026. If a sell scenario is triggered and BTC drops back to around Strategy’s average cost of $75,537, then 2.3% of the total position would equal 25% of this year’s increase.

In other words, Saylor’s sales over a year can offset four months of purchases.

STRC "Weak"

During the March dividend cycle, STRC traded above $100 for 13 days prior to the ex-dividend date, with a cumulative volume of 3.42M shares, equivalent to approximately 22,000 BTC in buy orders. During the April dividend cycle, STRC generated approximately 47,000 buy orders.

With only 5 trading days left until the ex-dividend date on May 15, the May ex-dividend cycle STRC has never returned to its $100 par value, meaning the corresponding BTC purchase is 0.

To understand why this dividend cycle is suddenly different, consider the STRC buyers divided into four categories:

· The first group consists of arbitrageurs who flood in days before the ex-dividend date. They buy STRC before the ex-dividend date and sell it after receiving the dividend. The peak trading volume on the ex-dividend date primarily comes from this group, and their sell orders are the main driver behind STRC’s price decline after the ex-dividend date.

· The second group consists of arbitrageurs who enter after the ex-dividend date. After the ex-dividend date, STRC typically drops to the range of 99.20 to 99.50; these traders buy STRC and place sell orders near 99.95 to 99.99, waiting for STRC to return to par value. This type of capital can profit without waiting for STRC to fully rebound to 100, and the wall of sell orders they submit is the primary reason STRC repeatedly hovers just below par value.

· The third category consists of medium- to long-term holders who treat STRC as a financial product. They do not actively arbitrage but may make small redemptions when they need funds; these occasional sell orders, combined with those from the second category of traders, are placed in limit orders near the $100 face value range.

The fourth category of participants are true long-term holders who do not sell; they have almost no impact on price dynamics during each dividend cycle.

If the source of STRC dilution is arbitrage traders, market behavior will tilt toward selling near the $100 face value.

This is what happened last month.

In March and April, Strategy raised nearly $5 billion through STRC—a volume of capital inflow that could only have come from arbitrageurs, as long-term holders would not suddenly increase their positions by this magnitude.

This also led to stronger arbitrage selling in April than ever before.

Strong selling pressure means that after the April ex-dividend date, STRC experienced a deeper decline and took longer to return to its $100 face value than usual, leaving a significant portion of Class I capital trapped at the bottom. This capital, having suffered losses, may no longer participate in the May arbitrage.

In addition, the external environment is also changing.

The S&P 500 continues to set new highs, changing the opportunity cost for fixed-income funds purchasing STRC, as daily gains in many U.S. stock sectors now exceed STRC’s annual yield (11.5%).

The Strategy team has anticipated this issue and submitted an amendment on April 17 to distribute STRC dividends twice per month. Semi-monthly distributions can reduce the price drop on each ex-dividend date and spread out arbitrage gains. However, this amendment will not take effect until July 15, so next week’s ex-dividend date will still follow the monthly schedule.

Reverse Flywheel

The previous article explained the Strategy flywheel: funds used to buy STRC are amplified threefold and flow into BTC; BTC price appreciation improves the collateral quality of STRC, attracting more funds into STRC. Each link propels the next one higher.

What if the flywheel spins in the opposite direction?

STRC cannot return to par; Strategy’s at-the-money (ATM) issuance window is closed, with no new cash to buy BTC; BTC loses marginal buying pressure, putting downward pressure on its price; STRC’s collateral base weakens, prompting fixed-income investors to demand higher credit spreads. As spreads widen, either MicroStrategy raises its dividend rate, increasing interest expenses, or investors continue selling STRC, making it harder for the price to return to its $100 par value.

Each link pushes the next one lower.

Saylor's statement about "possibly selling some BTC" is essentially pricing in the end of this reverse cycle.

In concrete figures: In April, the Strategy net purchased approximately $4.1 billion worth of BTC through STRC. If the issuance volume of STRC in May reverts to the $1 billion range and BTC does not appreciate by the 2.3% threshold, the Strategy will activate its sell-BTC-to-pay-interest contingency plan, causing monthly net contribution to drop sharply from $4.1 billion to just hundreds of millions, a contraction of over 90%.

The argument that "STRC buying" has served as a support level for BTC over the past several months will be proven false, and BTC's price will face significant correction.

It must be acknowledged that this is only one possible path. If STRC successfully returns to $100 next week and the issuance scale is substantial, all previous concerns will be postponed.

Bullish signals

On May 8 during pre-market trading in the U.S. stock market, STRC issued its first distribution of this dividend cycle, corresponding to a purchase of 0.4 BTC.

The absolute scale is negligible; the significance lies in the transition from zero to one.

Meanwhile, the Coinbase premium turned positive briefly and returned to April levels.

Next week’s STRC performance will be crucial in determining whether BTC, which appears to be losing upward momentum, will retreat back to its February range or push toward $90,000.