Global Research Strategy Note for Institutions, Companies, and Employees

I went to Strategy World last week. On the Bitcoin side, this conference might as well be called “Stretch World.” STRC (Strategy Variable Rate Perpetual Stretch Preferred Shares) was the main topic of discussion. SATA, another variable rate digital credit instrument issued by Strive, was also frequently mentioned.

Here are my thoughts, mainly aimed at institutional investors, companies, operators, and analysts in the Bitcoin space.

The Most Effective Bitcoin Onramp

The strategy has completely penetrated STRC, aiming to make STRC the biggest success story ever. Widespread adoption of STRC may be the most effective vector for Bitcoin adoption. To really understand why, we need to understand two things.

First, STRC’s value proposition is very easy to communicate with anyone within 10 seconds. Even though the Strategy probably won’t put it this way, many experienced people think of STRC as an alternative to high income. Note that “currency variants” and proposals for “money market funds” carry some legal weight in the use of such terms.

But this is mainly the economic result of STRC, as it is designed to trade very close to its price of $100 while giving up a high yield (now 11.5%, although this is a variable rate instrument so it will change). Compare this very simple value proposition—a high-yield currency—with that of bitcoin. The average person (and I would argue up to 90% of people) will choose STRC over bitcoin. In fact, STRC does something that Bitcoin ETFs cannot, because STRC turns bitcoin into something that better meets the everyday needs of many people.

The second point is that Strategy uses the dollars raised by selling STRC to buy bitcoin, so someone who buys STRC at Strategy’s ATM causes that money to go into bitcoin. Of course, we should not get the idea that every dollar invested in STRC is a dollar invested in bitcoin, as it is possible for someone to buy shares of STRC from another owner of STRC, who may not use that money to buy bitcoin. The point is that STRC opens up the bitcoin market to consumers who may not consider or understand the value proposition of bitcoin.

All in all, I believe STRC is the most efficient bitcoin onramp ever created. It may not be the onramp that many OG Bitcoiners envisioned, but in the end it’s the one that works for most people that can attract huge amounts of money.

The capital that STRC is attracting is truly insane. It was the largest IPO in 2025. And it was a preferred stock! Since then nearly billions of dollars have been withdrawn through the ATM system. The ATM issuance accounts for 19% of STRC’s outstanding shares today. Over $3 billion has flowed into bitcoin thanks to STRC.

At Strategy World, many companies have announced that they are using STRC as a treasury stock. This should not be surprising. Companies need to park working capital and STRC is the best risk-adjusted vehicle for doing so. Companies have bought long-term commercial paper, but the yield on these is low and there is no tax benefit.

STRC fixes this. It is the best bitcoin onramp because it is attractive to the highest number of organizations.

Layer 3 and Digital Currency

To me, BTC is already a digital currency, and Layer 3 and Layer 2 represent the technical infrastructure to measure the portability of BTC (ie. Lightning or Ark). So this terminology has always seemed problematic to me, but it’s the one that’s being used (and is likely to stick) so we’ll just go with it.

Saylor calls bitcoin “Digital Capital”. This is Layer 1. On top of that, STRC and SATA and other credit instruments issued by Bitcoin finance companies will be Layer 2, or “Digital Credit”. Digital Credit removes the risk and upside of bitcoin, and the excess and upside risk is absorbed by conventional equity. The structure, as we covered above, provides a well-structured form of bitcoin exposure that is very attractive to the average investor.

Finally, using Digital Credit, one can create a “Digital Currency” or Layer 3. Digital Currency, under this framework, is a savings account or stablecoin token or fund that has reduced volatility to almost 0 while transferring a large portion of the yield from Digital Credit. This can be done using a number of different techniques including risk management, buffers, and tail fencing, but I won’t go into detail here. The main challenge in creating this appears to be in choosing the right structure that balances compliance with the profitability of a Layer 3 issuer. Actual trading and risk management is trivial.

Layer 3 is very interesting because it is possible that Digital Credit receives an order of magnitude increase in its distribution and the market it can address.

You see, although some people would like to hold STRC or SATA, they may not be able to because they are unbanked or do not have a US merchant account. They may also find that there may be some residual instability that is not palatable. The concept of Digital Currency can address both of these pain points, and bring bitcoin to the many side pools of money. The end game would be if Digital Currency can be used as a spending account, where users and merchants can pay and be paid in Digital Currency.

In the long run, given the sufficient distribution of Layer 3 Digital Money and less market friction, the general return of these Digital Money instruments would probably meet the bitcoin CAGR, which could permanently close the bitcoin-fiat trading by Bitcoin treasury companies. This to me is the most possible way of Hyperbitcoinization.

Companies working on Layer 3 solutions deserve a close look by VCs.

(Levered) Digital Credit as a Risk Parity Sleeve

Risk Parity is a portfolio strategy popularized by Ray Dalio years ago at Bridgewater. It aims to balance the risk contribution of diversified assets, taking advantage of the free lunch of diversification provided by holding unrelated assets. The idea is that if bonds generate a third of the volatility of stocks, then a risk-weighting strategy might go 3x long bonds so that the contribution to portfolio risk from bonds matches that of stocks (we’re missing some covariance calculations here, but this is the gist).

Risk equity basically leverages less volatile and less correlated assets to act as a cushion or driver of return, depending on the market. Some readers may see this as related to the “all weather portfolio” concept. Although risk equity has its flaws (everything is short synthetic volatility and short correlation, which introduces weakness in the tails), it has found a place among suppliers.

Digital Credit is very flexible. If the STRC behaves like the instrument it is designed to be, then its apparent volatility should look closer to short-term credit than equity, long-term bonds, or commodities. In short, it’s cash-like but with real benefits.

A risk-weighted index can then increase STRC’s exposure without exploding the portfolio’s volatility. And unlike cash or previous T-bills, STRC delivers reasonable interest rates while remaining conservative in value. In short, it is an excellent addition to the credit allocation of the risk parity portfolio.

Leveraged Digital Credit as a fund concept is mentioned in the introduction, along with “buffered” Digital Credit (for example a 50/50 split between STRC and T-bills for lower yield but less volatility). Both are powerful.

Secondary Market Carry Trade

One interesting trade that can be made in this context is to borrow at low rates and buy Digital Credit that yields high rates. Simple implementation using brokerage margin. Given an average margin of 8% compounded daily, STRC that pays 11.5% in monthly dividends still makes a good profit after paying the margin. Credit is very low duration and callable, so one cannot depend too much on it or else a big dip in STRC value may lead to call and termination.

It may be possible to pair SGOV trading with STRC to get a spread, but this depends on SGOV’s borrowing levels.

I think the best way is to finance it with broadcast boxes. This gives the cost of capital close to the risk free rate, and the “character bond” is paid at maturity (expiration of the box spread). This exchange by retailers and institutions alike in the secondary market is sure to bring more liquidity and unseen energy to the ecosystem. Long-term opportunity, and risks to watch.

Digital Ouroboros and Incestuous Credit

Here’s an idea I heard at the conference:

“Imagine if Strategy buys SATA at a reserve and Strive buys STRC at a reserve. Both parties are entitled to more profit? More value is created!”

At this point we are probably entering the realm of what not to do. The reserve is designed to give the impression that the shares will be supported even if the company has hard times (read: Bitcoin bear market). Unfortunately, if the reserve is in Digital Credit that sells and removes the stakes from the risk of Bitcoin, then the reserve will not really be a reserve.

Also, remember that reserves are partly responsible for the perception of reduced risk, which compresses credit spreads. If the reserve currency was not actually able to reduce the risk of Digital Credit because the reserve currency was Digital Credit itself, then the Digital Credit instrument that the reserve should be backed by would also fail very quickly under pressure.

Like a snake eating its own tail.

I do not foresee such use of debt related to the relatives of large issuers, but something like this may appear in small treasury companies that wish to get more money. Using STRC to get working capital is one thing (and appropriate in most cases). Savings aimed at protecting debt investors is a different matter. This is perhaps another possible risk to watch out for.

An interesting thought would be a sufficiently fenced tail for Layer 3 being a storage area. As long as the low correlation to BTC is removed, it probably works.

The conclusion

Strategy World was amazing. I highly recommend it.

Disclaimer: This content was written on behalf of Bitcoin For Corporations. This article is for informational purposes only and should not be construed as an invitation or solicitation to acquire, purchase or register for securities.