Has Strategy’s capital overhaul put an end to ‘death spiral’ fears?

Strategy's latest plan includes MSTR and STRC buybacks, expanded cash reserves and even potential Bitcoin sales. Will it be enough to defuse the overheated “death spiral” fears?

With Bitcoin plunging below $60,000 and Strategy’s share price down by more than 70% from the high, some crypto investors are questioning if Strategy could become this cycle’s Terra/LUNA — a highly leveraged bet on crypto market structure that explodes under stress.

The company's response? A new capital framework released on Monday aimed at addressing investors’ fears.

The package includes up to $1 billion in buybacks for MSTR, up to $1 billion in buybacks for STRC and related securities, an increase in STRC’s dividend to roughly 12%, and a cash buffer expansion to $2.55 billion.

Of particular note for a company famed for its maximalist approach to Bitcoin, Strategy also said it may sell up to $1.25 billion in BTC holdings if required to meet dividend or debt obligations.

Markets responded positively to the news, with both STRC and MSTR shares rallying more than 12% in after-hours trading. STRC is currently trading at $84.86, a significant improvement on the $72.06 it was trading at on June 26.

STRC share price rallied by over 12% in after-hours trading. Source: Yahoo Finance.

But is the plan enough to assuage fears that STRC’s structure — famously cooked up by CEO Michael Saylor with the help of an LLM — could expose Strategy to a “death spiral” of reflexive funding risks during periods of market stress?

STRC is part of Strategy’s capital structure linked to its broader Bitcoin treasury strategy. It sits between traditional equity and debt-like instruments, offering investors yield while maintaining exposure to the company’s Bitcoin holdings.

Related: Strategy's MSTR may plunge 80% if it repeats this dot-com-era fractal

Strategy describes STRC as a perpetual preferred stock paying a 12% annual dividend on a $100 par value, funded from its cash reserve and Bitcoin-linked capital framework.

While the structure is designed to provide financing flexibility without issuing traditional debt, analysts have questioned whether its stability depends on continued investor demand in secondary markets, particularly during periods of Bitcoin volatility or tighter liquidity conditions.