Strategy's Financial Woes Send Shockwaves Through Decentralized Finance

Strategy, the world's largest corporate holder of Bitcoin with roughly $58.5 billion in its balance sheet, has been struggling to maintain its financial stability. Its common shares have fallen from an all-time high close of $473.8 to as low as $82, while its market capitalization now stands at $28.5 billion.

The company's popular preferred stock, Stretch (STRC), which CEO Phong Le likened to a money market fund, has also declined in value, falling to $74, $26 below its $100 par value. It currently pays a junk-bond-level 12% annual dividend.

Strategy has been forced to sell up to $1.25 billion worth of Bitcoin to build its cash reserve and cover payments, including approximately $218.5 million sold between late May and early July. Its cash reserve now stands at $3.75 billion, enough to cover 2.1 years of current dividends.

However, the fallout from Strategy's troubles extends beyond the company itself. Before it plunged, Stretch had become popular among decentralized-finance firms looking to transform its hefty dividend into blockchain-based yield products. The two largest firms, Apyx and Saturn, currently hold nearly $490 million in combined value across their products.

Apyx issues a synthetic dollar called apxUSD against the reserves held by Strategy's preferred stock, while Saturn offers a slightly different trade with its USDat stablecoin backed by tokenized Treasury bills. Investors seeking higher returns can exchange it for a yield-bearing version called sUSDat, backed primarily by Saylor's Stretch preferred stock.