An often-overlooked metric by stock market investors is the capital market measure termed ‘amplification’ at Strategy (MSTR), the top publicly traded bitcoin holder. Amplification compares Strategy’s total debt and debt-like instruments, including preferred stock, to its 766,970 BTC holdings. As amplification increases—similarly to leverage—it heightens company risk, making common stock more reactive to changes in bitcoin prices.
While investors typically focus on bitcoin’s price and the mNAV premium for assessing Strategy, a rise in amplification—which currently stands at about 33%—might soon become the primary risk factor. The capital structure of Strategy places convertible debt, totaling $8.25 billion, at the top as the most senior claim, followed by various preferred stocks like STRC, STRK, STRD, and STRF with a notional value around $10.3 billion, per MSTR’s dashboard. Common equity, labeled MSTR, sits at the bottom, absorbing all remaining gains or losses.
STRC has been developed to be Strategy’s main bitcoin accumulation vehicle, ranking senior to common stock but junior to debt. It offers an 11.5% annual dividend, paid monthly in cash. Recently, STRC’s trading volume has jumped from negligible levels to about 20% weekly, occasionally surpassing 25%. According to the MSTR dashboard, on Friday, MSTR traded $1.7 billion, below its $2.5 billion 30-day average, while STRC traded $526 million—nearly double its $259 million average—accounting for almost 50% of MSTR’s volume in a single day.
Increased activity in STRC complicates managing amplification without issuing more common stock equity, which could negatively impact performance relative to bitcoin. In the past month, while the price of bitcoin has stayed relatively stable, MSTR’s value has declined by 11%. At lower amplification rates, MSTR acts like leveraged BTC; however, higher levels make management challenging, alongside approximately $1.12 billion in annual financial commitments.