Strategy Shifts Focus to Boost Bitcoin Demand with New Digital Credit Plan

Strategy, the world's largest bitcoin treasury firm, is trying to find new ways to generate cash as its cost of debt financing has risen significantly. This is part of its aggressive bitcoin acquisition strategy, which aims to double bitcoin per share over seven years through its 'digital credit' plan.

The company owns 842,138 bitcoins, or almost exactly 4% of the maximum total issuance of 21 million tokens. However, up to 20% of bitcoin's total issuance is lost forever, meaning Strategy's holdings may be closer to 5%. As it captures more of the market, bitcoin's 'free float' becomes smaller and smaller, leading to higher demand and prices for the remaining supply.

To continue its rapid increase in purchases and drive up the price of bitcoin, Strategy has turned to financial engineering. It is using convertible bond offerings and preferred stock to raise cash, but executive chair Michael Saylor thinks he's found a new way to fund the company with an increased focus on its Series A Perpetual Stretch Preferred Stock (STRC).

This approach may boost incremental demand for bitcoin, leading to higher prices. Strategy can adjust the yield on its preferred stock to raise its price, or use dollars to repurchase preferreds if they drift too low.