Will the STRC issuance price discussed with ChatGPT really fall into a death spiral?

Author: Chloe, ChainCatcher

Since the launch of STRC by Strategy at the end of July 2025, Bitcoin has fallen by about 40%, nearly 50%. This preferred stock, designed to "trade at a value of $100," is now deeply discounted: last Thursday, it hit a historic low of $82.53 during trading, and it closed at only $88.59, still about 13% below par. As the discount widens, the effective yield of STRC has risen to over 12.9%, approaching 13%.

Jesse Myers, the Bitcoin strategy director at The Smarter Web Company, stated, "Strategy is fine," while economist Peter Schiff referred to the entire structure as a "typical centralized Ponzi scheme."

Thus, the old questions have resurfaced: Will Strategy be forced to sell Bitcoin? Is the flywheel it relies on for expansion actually a Ponzi scheme?

Is STRC a mechanism designed by AI?

To discuss STRC, we must first address a detail that is easily overlooked but has resurfaced during this downturn: this structure was developed through discussions between Saylor and AI.

The controversy stems from a segment of a May CoinDesk interview that has been circulating again on X. In the clip, Saylor admits that he heavily relied on artificial intelligence while developing the Strategy preferred stock product. He stated that during the development of Stretch, these concepts were all designed with AI, which he could not have accomplished alone; he spent several hours discussing with AI back and forth.

According to him, he continuously threw various structural settings at AI to test whether some atypical ideas were legally viable. When he proposed, "I want a preferred stock that pays dividends monthly and maintains a stable price of $100," AI responded: No one has ever done this historically, but it is completely legal and entirely reasonable.

Interestingly, when STRC fell below par and the market began to question whether this mechanism could hold up, many foreign media outlets turned back to ask AI, including ChatGPT, Grok, and Claude, whether STRC could rise back to $100.

Will Strategy sell Bitcoin again?

Not long ago, Strategy sold 32 BTC, worth about $2.5 million, to meet its dividend obligations. This amount is negligible compared to its overall Bitcoin reserves, but it proved one thing: when the financing efficiency led by STRC declines, cash obligations can indeed force limited selling of Bitcoin.

What is more concerning is the freezing of buying pressure. Strategy's pace of increasing Bitcoin holdings has clearly slowed: in April this year, it spent $2.54 billion in a single week to buy 34,164 BTC; in May, it invested about $2.01 billion to acquire 24,869 BTC. However, by June, the weekly buying volume shrank to around $100 million. As of the week of June 8, it bought 1,550 BTC ($101 million), and in the week of June 15, it bought another 1,587 BTC ($100 million), bringing the total holdings to 846,842 BTC.

Additionally, the widening discount has not only pushed up the yield but also put the "at-the-market issuance" mechanism on hold, which is a key link supporting the entire Bitcoin flywheel.

However, bulls do not buy into this "death spiral" narrative. Jesse Myers believes that the recent sell-off of STRC looks more like a leveraged liquidation rather than a deterioration of fundamentals. He estimates that if conditions remain unchanged, Strategy's current state is sufficient to pay STRC dividends for up to 32 years; and as long as Bitcoin appreciates by about 2% annually, this obligation can be indefinitely covered. Moreover, the tool of issuing shares has not disappeared; even if at-the-market issuance is temporarily halted, Strategy still has multiple backup financing options, including restarting the issuance of MSTR common stock and utilizing cash reserves, only resorting to selling Bitcoin when absolutely necessary.

On the short side, Schiff follows his classic script. He argues that if Saylor raises the yield to 13%, he will have to sell more MSTR at a larger discount to finance it; if he does not raise the yield, the price of STRC will continue to fall. In his view, the only way to end this death spiral is to cancel the dividends directly, but that would immediately collapse STRC, dragging MSTR and Bitcoin down with it.

Is this flywheel a Ponzi scheme?

Schiff's accusation is straightforward: STRC is a "typical centralized Ponzi scheme" because its operation depends on whether Strategy can continuously raise new money through new rounds of stock issuance or simply sell Bitcoin to fulfill its obligations. Even trader DonAlt publicly questioned why STRC's price movement after falling below par "trades like a Ponzi scheme."

Strategy has not directly responded to such accusations but continues to position STRC as a preferred stock supported by its Bitcoin DAT strategy. A more specific action has been to change STRC from monthly dividends to semi-monthly dividends, meaning it will pay out twice a month.

The core argument from the opposition is "leveraged liquidation." Myers points out that the issue is not with the structure itself, but with STRC trading close to $99 to $100 for an extended period, enticing investors to leverage heavily, with many presuming this tool would remain above $95; once the price slipped, margin calls and forced liquidations amplified and accelerated the downturn.

Analyst Scott Melker offers another perspective: the discount may actually attract yield-seeking buyers. Since STRC's dividends are calculated based on a $100 liquidation preference rather than the market price, a buyer at $90 would effectively receive about a 12.8% yield, while a buyer at $85 would receive about 13.5%. The deeper the discount, the higher the effective yield, which in itself is an enticement.

Thus, the question of whether it is a Ponzi scheme ultimately depends on which explanation the market believes: one view is that this mechanism can only operate by continuously bringing in new money, with the money from new entrants being used to pay earlier investors, which is a characteristic of a Ponzi scheme. The other view is that the tool itself is sound; it was just that previously everyone thought it was stable and borrowed heavily to increase their positions, and this time, when the price slipped, those people were forced to sell at a loss, amplifying the downturn, which is a one-time washout, not an issue with the tool itself.

Semi-monthly dividends officially take effect; answers may be revealed in June?

Reflecting on the aforementioned points, since this mechanism was designed by Saylor using AI, many foreign media outlets have thrown the same question back to AI: Can STRC return to $100, and what should Strategy do to rebuild market confidence? The common answer from ChatGPT, Grok, and Claude is, "Returning to $100 requires conditions."

ChatGPT believes that returning to $100 is still possible, but it requires stronger market confidence, sustainable dividend coverage, and a rebound in Bitcoin prices—all three must be present. It emphasizes that the fastest path to repair is to make investors believe again that dividends can be maintained without relying on asset sales; if more Bitcoin selling is truly needed later, confidence may further deteriorate.

Grok's attitude is the most reserved, bluntly stating, "Maybe, but it will be extremely difficult." In its view, the market is essentially asking: Can the engine that supplies blood to this Bitcoin-buying machine still operate? It believes that a sustained rise in Bitcoin prices would be the most effective catalyst; conversely, prolonged weakness would weigh on both STRC and MSTR.

Claude points out that preferred stocks often recover from discounts back to par, but the premise is that investors must believe the issuer can fulfill long-term obligations. "Repair is possible, but the market needs to see evidence that this structure can operate in adversity, not just when Bitcoin is rising."

So, is there a problem with this strategy? Whether it is the bearish Schiff, the bullish Myers, or top AI models, they all point to the same decisive variable: Can Strategy continue to fulfill its dividend obligations without selling Bitcoin?

The current flywheel has not stopped, but it has clearly slowed: at-the-market issuance is paused, and the pace of buying Bitcoin has shrunk from several billion dollars weekly earlier this year to about $100 million per week in June; the sale of 32 BTC further proves that when issuing shares is not going smoothly, the door to "selling Bitcoin to pay dividends" has already opened. Whether it is a Ponzi scheme or a one-time leveraged washout will depend on whether STRC can return to par and what Strategy relies on to pay dividends.

The most specific observation point falls on June 30: on that day, the change to semi-monthly dividends will officially take effect, but the real focus is on the rule that automatically adjusts the dividend rate based on price; if the average price for the month is below $95, it suggests raising the rate, and it will stop only when it exceeds $99. Now that it is deeply below $95, it is almost certain that the rate will increase, and the dividend rate has climbed from 9% in August 2025 to 11.5%.

This is precisely the core of Schiff's death spiral: the lower the price, the more the mechanism automatically pushes the dividend rate up, the larger the cash bill, and ultimately, it can only rely on issuing more shares or selling more Bitcoin to fill the gap. Whether this mechanism is a "stabilizer" or an "accelerator" lies in the upcoming prices and interest rates.

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