Strategy's BTC Floor: A Complex Metric with Significant Implications

Strategy, the Bitcoin treasury company, is marketing a 'BTC Floor' of roughly $13,400 for its STRC variable-rate cumulative perpetual preferred stock. This label suggests a significant buffer against losses, but it's actually a metric that measures the price at which Strategy's illustrative STRC coverage ratio reaches 1.0x.

The BTC Floor is calculated by dividing covered notional by the number of Bitcoin held, and it's sensitive to changes in USD assets. With $6.69 billion of USD assets, the modeled floor would be around $13,421 at a Bitcoin price of $77,004. However, depleting USD Cash or all USD assets could push the threshold to over $21,000.

Strategy's debt stack is complex, with $6.714 billion of debt and $9.972 billion of STRC notional. The company has a senior STRF layer and MSTR common shares ranking ahead of and behind STRC, respectively. Its BTC Rating, which measures the dollar value of Bitcoin reserves by covered notional, would rise to around 5.84x if dated inputs stayed fixed.