Q1 2026 Earnings Call Transcript

Hello, everyone.

Good evening. I am CJ, head of investor relations at Strategy Inc. It is an honor to kick off Strategy Inc's first quarter 2026 earnings webinar. I will be your moderator today.

We will start the call with a 60-minute presentation, starting with Andrew Kang, followed by Phong Le, and then Michael Saylor. This will be followed by a 30-minute interactive Q&A session with four Wall Street equity analysts and four Bitcoin analysts. Before we proceed, I will read the safe harbor statement. Some of the information we provide in the presentation regarding our future expectations, plans, and prospects may constitute forward-looking statements.

Actual results may differ materially from these forward-looking statements due to various important factors, including fluctuations in the price of Bitcoin and the risk factors discussed under the caption “Risk Factors” in Strategy Inc's annual report on Form 10-Ks filed with the SEC on 02/19/2026, and the risks described in other filings that Strategy Inc may make with the SEC. We assume no obligation to update these forward-looking statements, which speak only as of today. With that, I will turn the call over to Andrew Kang, the CFO of Strategy Inc.

Thank you, CJ. First off, I would like to officially welcome CJ Jain to his new role as Strategy Inc's head of investor relations. I also want to take a moment to thank Shirish Jajodia, our corporate treasurer, for helping establish and lead our IR function for the last 20 quarters. As our team grows, I know we will strive to continue to provide transparent and relevant information to all of our shareholders and stakeholders.

So welcome, CJ. Now turning to the quarter's results. We are off to a very strong start in 2026. We now hold 818,334 Bitcoin, which is about 3.9% of all Bitcoin that will ever exist. That keeps Strategy Inc in a clear leadership position as the largest corporate Bitcoin holder in the world.

Our market cap is now $62 billion, and STRC has grown to $8.5 billion outstanding, showing strong market fit and investor demand and filling a gap that has existed for investors seeking stable price and attractive yields backed by Bitcoin. So far in 2026, we raised about $11.7 billion of capital, giving us more flexibility to keep our Bitcoin position and creating long-term value for our shareholders.

Turning to Q1 financial results. We reported an operating loss of $14.5 billion and a net loss of $12.8 billion. As you would expect, these results were primarily driven by the decline in Bitcoin's fair value during the quarter, and as these are largely noncash market-driven impacts tied to Bitcoin's quarter-end price, our underlying strategy remains unchanged: raise capital responsibly, buy and hold Bitcoin over the long term, and grow Bitcoin per share for our shareholders. On slide eight here, Bitcoin per share increased from 181,030 sats per share in May 2025 to 213,371 sats per share in May 2026, roughly an 18% year-over-year increase.

Year to date, we have delivered 9.4% BTC yield compared to 22.8% for the full year 2025, showing acceleration year to date compared to the same point last year. We have also generated 63,110 BTC gains so far in 2026 compared with 101,873 BTC for all of 2025, having already achieved about 62% of last year's full BTC gain in just the first four months of the year. In dollar terms, that represents approximately $5 billion of dollar gain year to date versus $8.9 billion for the full year 2025. Since 2020, Bitcoin per share has grown to 213,371 sats per share as of May 2026, which is nearly a 4x increase since the beginning, delivering positive BTC yield every year across multiple market environments.

In 2025, we delivered 22.8% BTC yield, and so far in 2026, we have already added another 9.4%. We remain focused on consistently increasing Bitcoin per share over time through our disciplined treasury operations and long-term conviction in Bitcoin. Here on slide 11, our track record remains constant, having acquired additional Bitcoin in every quarter since 2020 across 108 separate acquisitions. As of May 4, we held over 818,000 Bitcoin for a total value of approximately $64 billion and a total acquisition cost of about $62 billion.

Our average purchase price is approximately $70,000 per Bitcoin, and our holdings now represent, as I mentioned, 3.9% of all the Bitcoin that will ever exist. Turning here to the balance sheet. Digital assets ended the quarter at $51.6 billion compared to $58.9 billion at year-end. Having acquired 89,599 Bitcoin in Q1, the change reflects the lower price of Bitcoin at the end of the quarter versus at the end of last year.

Cash and cash equivalents were $2.2 billion, which largely reflects our USD cash reserve. Regarding taxes, the change this quarter was driven by the quarter-end mark-to-market movement in Bitcoin, and as Bitcoin moved from an unrealized gain at year-end—our deferred tax liability of $1.9 billion—shifted at the end of Q1 to an unrealized loss, to a deferred tax asset. A full valuation allowance against that tax asset brought the net balance sheet tax position to zero, which also resulted in a noncash tax benefit on the income statement which partially offset the pretax loss for Q1. Long-term debt remained unchanged at $8.2 billion, while equity increased to $9 billion driven by strong STRC issuance in the quarter.

Overall, the balance sheet remains highly liquid and extremely well capitalized. At the end of Q4, the market value of our Bitcoin was approximately $59 billion, which is based on a Bitcoin price of about $87,500. During Q1, we recognized that unrealized fair value loss of $14.5 billion, and despite Bitcoin price volatility, we continued to purchase an additional 89,599 Bitcoin in the quarter, approximately $7.3 billion at an average price of about $80,900. We ended the quarter with a digital asset value of $51.6 billion based on a Q1 ending Bitcoin price of about $67,800. In Q2 so far, we are illustrating an unrealized fair value gain of approximately $8.3 billion as of May 1. We purchased an additional 56,235 Bitcoin quarter to date for approximately $4.1 billion at an average price of roughly $73,400 for that period.

Those purchases, benefiting from the increase in Bitcoin price, add approximately $300 million of positive fair value, and as of May 1, our Bitcoin held a market value of approximately $64 billion based on a Bitcoin price of $78,035. In dollar Bitcoin reserve, implying an MNAV of 1.27, which has expanded since the beginning of the year. We have $13.5 billion preferred equity, representing 34% amplification, and net leverage of 9%, made up of the $8.2 billion of convertible debt. Strategy Inc is building around Bitcoin as digital capital. We have approximately $58 billion of equity.

You can see here large traditional banks operate with liabilities-to-asset ratios above 90%. Our ratio is a mere 9%. That gives us a very different foundation made up of a very large equity base, substantial Bitcoin reserves, and structurally lower balance sheet risk. We can issue Bitcoin-backed credit products to support investors with strong collateral and continue accumulating Bitcoin over the long term from a position of strength and durability.

We have approximately $6 billion of net debt, which represents just 9.3% net leverage against our Bitcoin reserve, which is effectively a 10.8x BTC rating. Our strategy is based on a disciplined balance sheet construction, modest leverage, strong collateral, and permanent capital to grow our Bitcoin over time. Our net leverage is lower than the average of the investment-grade S&P universe, and lower than every major industry sector across most S&P 500 companies. At the current Bitcoin price, our reserve is valued at approximately $64 billion compared to $6 billion of net debt, which translates to the 10.8x BTC rating.

The stress case on the right shows that even after a 91% Bitcoin price decline to roughly about $7,300 per Bitcoin, our Bitcoin reserve would still be sufficient to cover our net debt at a 1x BTC rating. Our USD cash reserve has remained at $2.25 billion, and while the years of coverage has shifted down with the growth of STRC this year, we believe the stable cash along with our Bitcoin reserves and ability to raise additional capital continues to provide us with flexibility to continue supporting our dividends for the foreseeable future. On the next slide, the $64 billion of BTC reserves adds an additional 43 years of coverage.

Another way to look at this: at today's reserve size, Bitcoin would need to grow by only 2.3% annually for the reserve growth to cover our current obligations. If Bitcoin grows at or faster than the breakeven ARR here, the BTC reserve alone can support our dividends without requiring any additional capital. Before I turn it over to Phong for his remarks, I would like to highlight the amendment to STRC that we have asked for your vote on. We are proposing to move STRC dividends from monthly to semimonthly, with payments twice per month on the 15th and the last day of the month, while keeping the economics unchanged.

Our goal is to make STRC work better for investors by reducing reinvestment lag, improving liquidity, dampening the impact of a single monthly record date, and helping STRC trade more efficiently around the target price. Today, STRC pays out 12 times per year with one payment at month-end. Under the proposed amendment, STRC would pay 24 times a year with payments around the 15th and the last day of the month. Again, total dividend economics are unchanged and payments would simply be about half the size and paid twice as often.

Under the proposed change, there would be two record dates, one on the 15th and one at the end of the month, with the related payment dates made on the next scheduled record date. If the vote is approved, the first record date would be June 30, and the first payment date would be July 15. The mechanics are pretty straightforward: same dividend economics, more frequent payments, and a clear transition timeline. We believe this change creates the highest-frequency credit instrument in the world and makes a great product twice as better, and we look forward to your support. With that, I will turn it over to Phong.

Thank you, Andrew. Thank you, everyone, for joining us on this evening's earnings call. I have a few updates to make on our capital markets, on our equity, on our digital credit, and then I will conclude with updates on our capital market strategy overall.

If you had asked us at the beginning of the year what was our target for the year in terms of capital markets raises, we would have said it was uncertain, and it really depended on the success of the STRC product. Four months in, we can say that STRC has been more successful than we had expected at the beginning of the year. One representation of that is the amount of capital that we have been able to raise for the company and ultimately for Bitcoin. Year to date 2026, we have raised $11.7 billion as Andrew mentioned—about half from issuances of our common equity, half from issuances of our preferred, primarily STRC—and no longer are we issuing convertible debt to raise capital.

How does that compare to the rest of the U.S. equity capital markets? Last year, we represented about 8% of the equity capital markets in the full year 2025. We were the largest issuer, and we are again this year the largest issuer in the equity capital markets—about 10% total: 6% of common equity, 60% notably of preferred equity. We are doing what we said we would do and what we were trying to do, which was to shift our ATM more towards credit. You see this even more pronounced as we look at each month of 2026. We started in January with 20% of our equity issuances using digital credit and 80% using MSTR, and we have largely flipped that number in April, with 17% using MSTR and 83% using digital credit, which is also less dilutive to our overall shareholders.

Research analysts have been consistently supportive. As we look to exit the Bitcoin bear cycle that we are in, the average price target of all of the analysts covering Strategy Inc for Bitcoin is $138,000, which is about a 70% increase. The average MSTR price target is about $323, which is an 80% increase from current levels. So let us talk about digital equity and MSTR overall.

We show this chart every quarter—you can find it on our website, strategy.com. This is our annualized asset performance since we adopted the Bitcoin standard. 08/10/2020 is when we look back to. We have outperformed Bitcoin by about 50%. Bitcoin has outperformed the Mag Seven by about 50%.

And the Mag Seven has outperformed the S&P 500. Our ultimate objective is for our common to outperform Bitcoin by accreting Bitcoin per share, and based on this chart, we continue to deliver on that performance. As Andrew mentioned, our Bitcoin per share is also accreting—that is our business objective ultimately. We are at 9.4% Bitcoin per share increase so far this year. You will see that has also accelerated in the last month.

We started off a little bit slow in January and February—0.4%, 0.1%. The increase in March was 3%, and it really doubled in April with 6%. Last quarter on this call, we said our objective is to double Bitcoin per share in seven years. Doubling Bitcoin per share in seven years implies about a 10% annualized BTC yield, and so far this year, we have increased 9% in our BTC yield.

We are well onto our annual target, and we have been happy with the success of STRC so far this year. Ultimately, MSTR continues to be one of the most widely held equities around the world and the most widely held Bitcoin proxy in the world. We are able to reach 1,400 institutions, 927,000 retail accounts, 1,300 ETFs and funds—over 100 million beneficiaries that share nearly 4% of the Bitcoin in the world. I do not think about this as concentrated amongst one company or a set of leaders, but really amongst 100 million people that we are sharing Bitcoin with per share around the world.

So let us talk about digital credit, our favorite topic so far this year. The idea of preferred capital and preferred credit is not a new idea. In fact, the industrial revolution was built on the railroads, which was built on analog credit through preferred capital. During the late 1800s and early 1900s, 20% to 40% of the capital structure around the world was preferred capital.

What happened in the mid-1900s and the early 2000s is the rise of liquid debt markets and increased regulation, pushing preferred capital into what I would call niche use. Now, as people are waking up to preferred capital and digital credit especially, we are seeing a reemergence. My analogy here is where preferred capital helped build the railroads—which helped drive the industrial revolution—now digital credit will help drive the digital railroads or the digital rails. It will drive the digital revolution, including the AI revolution.

We are excited about bringing this back to the forefront of the world. If you look at an overview here, we have five preferreds. We have mostly been focused on STRC so far this year. I think there is an opportunity for the remaining preferreds to start to perform as Bitcoin starts to perform, but STRC is clearly the tip of the arrow as far as digital credit, and that is what I will talk about primarily.

We are up to an 11.5% dividend yield. Notably, we have kept this flat for the last two months. We increased the dividend yield from 9% to 11.5%, and now we are flat for the last two months because what we have seen is the volatility has started to decrease, the price has started to remain stable, and we have seen an increase in Sharpe ratio to 2.53. The notional value is up to $8.5 billion, and we are trading $375 million a day. I will share how that compares to other preferred equities and also common equities in general.

The first thing I will note is the rapid growth of STRC. In just nine months, we have raised $8.5 billion of capital. It had a running start with $2.8 billion, it slowed down, and it has really accelerated over the last couple of months. Comparatively, this is one of the most successful financial instruments ever created.

In terms of capital inflows, it is second only to IBIT. Compared to other products, it has seen faster growth in terms of capital inflows than famous products like the iPhone or Google AdWords. We are very proud of the acceleration of the product, and it means that we built something that is resonating with people in the U.S. and people around the world. STRC is by far the largest tradable preferred in the world.

We are nearly two times the size of Wells Fargo's preferred. Almost all of these other preferreds, save us and another one, are bank preferreds. This has gone from being an industrialized product that helped build the industrial revolution to a niche financial product, and we are excited to bring it back to being a major product in the world. The liquidity of STRC—the 30-day average trading volume—is 25x the second largest preferred.

Where Wells Fargo is about half our size, it is trading one twenty-fifth of what we are trading at—$15 million versus our $375 million. With that liquidity, the turnover compared to the next best preferred, we are at 4.4%, 10x of what Wells Fargo is and some of these other products like Bank of America products. We think we have really found a new product category—digital credit—based on an old product category—preferred capital—and we are excited about where this is going. Interestingly, STRC is performing not just as one would expect in a bull market, but performing in a Bitcoin bear market.

While Bitcoin has gone down 37% since October, now it is starting to rise again, and we are seeing STRC trade essentially near par and paying dividends that are increasing monthly. We have increased the dividend from 9% to 11.5% and kept it steady at 11.5% for two months, now going on three months, while Bitcoin has been decreasing. With that, we have also seen the ATM velocity of STRC accelerate, and the ATM velocity is really the net inflows into the product. Notably, in April, we had a week where we raised $1 billion, and then the subsequent week we raised $2.2 billion.

We have seen tremendous demand coming into STRC. At the same time, we are seeing the volatility decrease. Our target price range for STRC is $99 to $101. We have actually seen it trading in a much tighter range, and for the last three months—March, April, May—it sat in that price range for 100% of the time. The daily liquidity is significant and growing, from $54 million to $120 million in January to $250 million in March to $300 million in April.

For those who are interested in getting into the product in size—if you are a corporate or if you are a large institution and you need to have confidence that when you need to trade in and out, you need liquidity—our product is showing that level of liquidity. I will go through a series of analyses of Sharpe ratio because Sharpe ratio ultimately is a measure of the returns above the risk-free rate given the volatility of the instrument, and ultimately, if you are an investor, people are looking for high Sharpe ratios. Compared to traditional credit—junk bonds and investment-grade bonds, bank preferreds—we outperform notably.

Compared to traditional asset classes—the S&P 500, even NASDAQ, etc.—we also outperform notably. And then, obviously, if you are looking for Sharpe ratio, a lot of folks go to the Mag Seven equities. NVIDIA is on a hot tear because of the AI trade. Google runs essentially a digital monopoly and has been a very solid equity over the course of the last 20 years.

STRC has outperformed all of those, in all of the Mag Seven. Another place people typically go to find a high Sharpe ratio are hedge funds. Hedge funds are built with different strategies, different analyses, different quant strategies, and typically they are built to outperform the S&P 500 with lower volatility. Looking at different hedge fund strategies, STRC to date—understandably early in its maturity—is already outperforming these different hedge fund strategies, whether you are multi-strat, macro, equity arbitrage, etc.

We see a lot of benefits to this emerging category of digital credit compared to hedge funds, private credit, private equity. One, it is extremely liquid. To get these levels of returns and these levels of Sharpe ratios, sometimes people subject themselves to 90-day lockups for hedge funds, 3 to 7 years for private credit, 7 to 10 years for private equity. We charge no fee.

These other strategies often charge a management fee of 1% to 2% and a 10% to 20% carry—a two-and-twenty, if you will. Digital credit is homogeneous—you know exactly what is behind it: Bitcoin. These other strategies are sometimes heterogeneous with many different assets grouped together, making it very hard to ultimately assess the risk. Ours is scalable through an ATM mechanism that allows people to buy the product, and hedge funds and other strategies are discrete.

We are accessible, traded via a four-letter ticker on the Nasdaq, and now, interestingly, trading on many tokenized exchanges and tokenized products. Other ones are typically restricted to those who are accredited, institutional investors, or high-net-worth individuals. We are transparent: we disclose our performance and our holdings through weekly 8-Ks and websites that update every 15 seconds. One of the big questions as we have seen STRC perform over the last four months—essentially the year 2026—is what does this mean for our capital market strategy?

I will introduce this topic, and Mike will talk about it a lot more. Our objective is to double Bitcoin per share in seven years through the success of digital credit. What does that mean? We sell digital credit, and we have said that we target about 10% to 20% of Bitcoin reserves annually in digital credit volume.

Of course, we will analyze that and assess that to see if that target makes sense. That will generate amplification to our common stock, which should increase the Bitcoin per share in our common stock, which is ultimately our goal. As we increase Bitcoin per share, that allows MSTR to outperform Bitcoin, which is what you have seen happen over the last six years. What allows us to flex these levers even better?

If our cost of credit goes down—if we are able to decrease the yield from 11.5% to lower for a variety of factors. If we are able to sell more STRC, that increases amplification. If our MNAV goes higher—and I will talk a little bit about our MNAV—that also creates benefits, for example, our cost of paying our dividend. What has happened in the last four months is we have increased optionality for Strategy Inc.

We have more sources of capital, and we have more uses of capital than we ever had before. The success of STRC gives us options to do different things from a capital markets and a treasury operations perspective to benefit our common shareholders. Our traditional sources of capital: sell MSTR, sell STRC. We could sell our USD reserve to pay dividends, which we added in November.

We also have Bitcoin that we have the option of selling. We can see our other prefs start to perform and sell those into the market, and we have talked in the past about also being able to potentially sell BTC or Bitcoin derivatives. Our uses of capital: primarily today, we buy Bitcoin, we use capital to pay our USD dividends, and we use capital to build up a USD reserve. We have used capital in the past to pay down our convertible debt, our secured loans, our Bitcoin-backed loans; we may continue to do that in the future.

We could also use capital, if we want to and at the right time, to retire any of our other preferreds. So what does this really mean? This means we had three trades that we have executed—and really before 2025, two trades: we sold MSTR and bought Bitcoin; we sold MSTR and bought U.S. dollars. Last year, we added STRC and prefs, and we sold STRC and bought Bitcoin.

Now we are really seriously thinking about and contemplating introducing a few more trades: selling MSTR at the right MNAV, where it is Bitcoin per share accretive, to buy back debt. That could mean considering retiring, potentially early, some of our convertible notes using our common stock. Selling STRC to buy U.S. dollars—we have not done that much to date—but perhaps reserving part of our STRC proceeds to build up our U.S. dollar reserve. Selling STRC to buy back debt—you can see how that would be an accretive trade to Bitcoin per share because STRC inherently on sale is not dilutive, and buying back future dilutive convertible shares.

And then the third set of interesting trades that I previewed: selling Bitcoin. This is a big statement, but our ability to sell Bitcoin either to buy U.S. dollars or sell Bitcoin to buy debt, if it is accretive to Bitcoin per share, is something that we would consider doing going forward. How do we make these decisions? Ultimately, there are two sides of the same coin.

One side is our equity performance, and to our common shareholders the most important thing is to accrete Bitcoin per share, which results in higher BTC yield, which ultimately together result in a higher BTC gain. Adding more Bitcoin and BTC gain on a dollar basis is the closest proxy to earnings per share. Those are the three KPIs we look to assess equity performance. On the risk side, we have a BTC rating, which is the amount that our debt and our leverage is overcollateralized by Bitcoin.

We have an MSTR duration, which is the average duration of all of our instruments. If you look at our perpetual preferreds, they have the longest duration based on a Macaulay duration basis—10 to 15 years. Our convertible debt has a shorter duration, so swapping longer duration for shorter duration is a good trade for us. Then we have MSTR risk.

The BTC rating and the MSTR rating together influence the total risk profile to the company. A couple of notes before I hand it off to Mike. One, Bitcoin per share accretion is our primary goal; MNAV is an input. The threshold for Bitcoin per share accretion when selling our equity and buying Bitcoin is increasing over time.

Where it used to be a 1.0x MNAV, as we add debt and as we add preferred—primarily to our structure—the breakeven increases. Right now, it is about 1.22x. That means at 1.22x MNAV or higher, it is accretive for us to sell MSTR and buy Bitcoin. Below 1.22x MNAV, it is actually more accretive for us to sell Bitcoin and pay off our dividends than it is above 1.22x MNAV.

There are benefits to the way we bought Bitcoin and the holdings of Bitcoin that we have by cost-basis tier. Taking $20,000 tranches—$0 to $20k, $20k to $40k, $40k to $60k, $60k to $80k, and beyond—we bought Bitcoin at every price level. Below current prices, about $80k, we have an unrealized gain from a tax basis on that Bitcoin. Above $80k, we have unrealized losses.

If we were to sell Bitcoin, our objective would be to sell high cost-basis Bitcoin to capture some of those unrealized losses and to take some of those unrealized tax benefits, of which on our balance sheet there is about $2.2 billion in estimated tax benefits. So there is a tax benefit if we were to sell high cost-basis Bitcoin, as an example, to pay down some of our dividends over time. Amplification: we are currently at about 34% amplification. A portion of that, about 10% of that, is driven by our convertible debt.

The ability for us to increase amplification to the company is higher when we have long-duration digital credit than it is when we have short-duration convertible debt. As the company starts to cycle over time from convertible debt to digital credit, we can take on more amplification with lower risk levels, so we could see ourselves getting to 50% to 60% amplification levels over time and still feel like we have a high credit quality and a high risk quality to the company. The U.S. dollar reserve: we have built up a $2.25 billion U.S. dollar reserve, which at that point represented over two years of dividends and interest payments, and now with the same exact U.S. dollar reserve we are at about one and a half years.

Adding to the U.S. dollar reserve reduces Bitcoin per share but improves the credit quality of the company, and so it is something that we will continue to evaluate over time—what the right level of U.S. dollar reserve is. We feel like at a minimum it should be $2.25 billion, but likely as we grow our digital credit and STRC, we will want to add to this at a certain level. To summarize how we think about managing capital markets and our balance sheet: one, our objective is to create long-term value for MSTR. We want to increase Bitcoin per share, which will increase the price of the common equity and ultimately be better for our common shareholders.

Two, we are going to continue to grow demand for STRC. We have seen it to be a very popular product in the market and very beneficial to our balance sheet. We will continue to improve the features as we can, for example, moving to semimonthly dividends. Three, we are going to proactively reduce convertible debt based on market conditions, and that could mean actively purchasing back, through whatever means we think appropriate, some of the convertible debt before it comes due.

Four, we are going to look at the STRC demand and credit risk to determine the size of the U.S. dollar reserve. There is a natural market mechanism that as the U.S. dollar reserve in months to cover—years to cover—decreases, the credit risk of STRC goes up nominally and could decrease the demand, and so we will monitor that to decide what is the right U.S. dollar reserve size. Five, similarly, the appropriate amplification for the company will also be based on market conditions. Mike and I and Andrew and the entire team are looking literally every day at what are the trades that are accretive to Bitcoin per share, what are the trades that create the right equity accretion, and what are the trades that manage the credit risk at the right levels.

Six, maybe most notable: we will sell Bitcoin when it is advantageous to the company. We want to be net aggregators of Bitcoin— increasing our total Bitcoin—but more importantly, increasing our Bitcoin per share because we think that is what is going to be most accretive long term for MSTR and for the common. With that, I will hand it over to Michael Saylor to complete the presentation.

Thank you, Phong. I will elaborate on some of the things set up till now and give you an overview of the BTC market and then our capital market strategy. Everything is based on digital capital, and Bitcoin is digital capital. That means global legitimate collateral, global property.

We keep track of Bitcoin as digital capital and the consensus in the market, and what you can see here is the U.S. government has embraced it. All of our key financial regulators—the head of Treasury, the head of the SEC, the head of the CFTC, and now the incoming head of the Fed—are all digital assets enthusiasts, innovators, and Bitcoin believers, as is the President of the United States, Donald Trump, and the Vice President, J.D. Vance, along with many other cabinet members. That is a very important fact.

There are a lot of bills still working their way through Congress. The most notable one right now is Clarity. The real key here is that Bitcoin is a priority in the House and the Senate, on the Hill, at the White House, and there is bipartisan support and bipartisan agreement for Bitcoin as digital capital, and for legislation that supports Bitcoin as digital capital in the world. A few months ago at our Bitcoin for Corporations conference, we saw major announcements by systemically important banks—Morgan Stanley, Citi, TD—all with intent to integrate into their operations.

This is something we only hoped for three or four years ago, and now it is reality. At the point that Bitcoin is integrated into the banking system, then it is digital capital here to stay. You can just see the announcements across your ticker everywhere in the world. This is a global phenomenon.

Whatever happens in the U.S. and with U.S. banks is spreading to Europe, to the UAE, to Hong Kong, to South America, etc. You are going to see these announcements accelerate, but we have crossed the event horizon. You cannot put the genie back in the bottle. Bitcoin has arrived.

We try to be systematic, so we track it. We track the 15 largest or most systemically visible banks in the world, and we look at their embrace of Bitcoin: as a creditworthy instrument, will they trade it, will they offer credit against it, will they custody it, will they handle the derivatives, etc. Adoption has advanced since even last quarter, and everywhere in the world across all of these banks, there are active efforts to improve Bitcoin support. If you track the number of accounts that support Bitcoin access, you can see we are marching up into the high hundreds of millions: 840 million crypto exchange accounts, nearly a billion neobank accounts, nearly a billion brokerage accounts that all have access to some sort of Bitcoin derivative.

ETFs, of course, continue to embrace. There have now been 125 ETFs with about $126 billion of capital. The capital flowing into these ETFs continues to accelerate. We were the first company to embrace, and now we are up to 194 public companies.

We anticipate this will continue to grow. Lots and lots of IPOs—the public markets have embraced Bitcoin, and this is just an example of some of the notable companies that have come public just recently that have substantial Bitcoin exposure. The digital credit ecosystem has been a very pleasant surprise. It has grown very rapidly, and it has become very diverse.

The way that we know digital credit is working is that companies and economic actors everywhere in the world that we have never met face to face are discovering this and building products and businesses around it. Right now, what we see is very enthusiastic support with retail investors, with corporate treasurers, with institutional investors, with crypto-native innovators, and with TradFi innovators. Five different groups of capitalists, but they are all getting very heavily involved enthusiastically and rapidly. If we drill into retail, 80% of all STRC shares are held by retail as of our last check.

This is an extraordinary fact. Normally, it is very difficult to get broad, deep retail support for a public stock, and yet we have been very pleasantly surprised. We are able to trace about 120,000 individual retail accounts. Word-of-mouth is spreading this.

It is spreading virally. Based upon our studies, we see that anybody that buys STRC is generally telling their friends, their family, their parents, their working associates about it, and it continues to spread by word-of-mouth. You can also see Schwab is a big distribution channel—23% of STRC is held in Schwab accounts. Fidelity is a channel.

Robinhood is a channel. Morgan Stanley and E*TRADE are channels. BlackRock is a channel. Interestingly enough, Vanguard, which will not let their investors buy Bitcoin natively, actually is a channel for STRC.

It is pretty exciting that we have wrapped Bitcoin into a credit instrument that is being distributed through all sorts of traditional finance channels to types of investors that otherwise would never be able to buy Bitcoin itself or would never want to. We estimate there are about 3 million households that are benefiting from STRC right now—think of it as powering a savings account for 3 million households. Phong mentioned about 100 million beneficiaries of MSTR. Well, 3 million beneficiaries of STRC in eight months is a pretty good start to the race.

Our ambition is to spread this to tens of millions and then hundreds of millions of people. We are also very enthusiastic about corporate support. Corporations, unprompted by us, figured out that it was a good idea for them. Corporate treasurers and CFOs with working capital have been allocating some of their treasury capital to STRC.

This is a really pleasant development, and we are starting to think that there might be thousands of companies that might allocate some amount of their treasury capital to STRC. I have had a lot of experience selling BTC to corporations. What I found is that tends to be a board-level decision—it goes all the way to the board of directors. The CEO has to be way behind it, and if one director on the board has concerns, the cycle slows down.

But with STRC, it is not a board-level decision. It is more like a CFO-level decision. If the treasurer is enthusiastic, the CFO can greenlight it. They might or might not give the CEO a heads up.

This is a very different value proposition. It is maybe a five-minute conversation with the CEO instead of a two-hour conversation with the entire board. For that reason, we think that STRC really is Bitcoin for corporations. It is going to spread very rapidly now.

Another very exciting thing is that STRC has spread into credit indexes. BlackRock’s is a $14 billion credit ETF, and STRC is the number two holding. VanEck’s is another credit ETF, and STRC is also the number two holding. Imagine an instrument coming out of the blue—nonexistent 12 months ago—and in less than 12 months, we have gone from nonexistent to number two.

Next stop, number one. We are enthusiastic about seeing STRC embedded in lots and lots of institutional credit indexes and funds. Third-party ETFs have been finding STRC and building innovative ETFs. Strive is building a digital credit ETF. 21Shares created an ETF with STRC and took it public in Europe.

There are a number of ETF providers that are working with us and in the pipeline right now. We are in active discussions with four. Over time, there will be more ETFs to build STRC into their fund offering. Digital money and digital yield: we start with digital capital at 34 vol on a rolling 30-day average and 39% ARR.

The one-year trailing vol of Bitcoin is almost 40. Think of it as a 40 vol, 40 ARR asset—raw economic energy. We split that asset into STRC, which is 3 vol, 11.5% yield, and then MSTR, which is 71 vol, 59% ARR. One is amplified Bitcoin—we call it digital equity—and the other is damped digital credit. Digital credit, we believe, is like the kerosene of finance.

It is the monetary fuel and is a universal monetary fuel. It is high-grade, highly distilled. From here, you can build all manner of products. Layer three is digital money and digital yield.

Neither would really be possible without digital credit. It is too difficult to distill pure zero-vol 8% money from a 40 vol, 40 ARR asset. You have to crack it. You have to have a crypto reactor, and you have to have $50 billion of equity capital to do it, and that is what we did to create STRC.

Simple definition in our lexicon: digital money is 0% volatility, daily liquid instruments built on digital credit—like zero vol, 8% yield coin. Digital yield is nonzero volatility or it might be illiquid—it might be a three-month lockup, 5x levered, 35% yielding fund that loops digital money four, five, six times to get there. Digital yield is a levered construct, and digital money is the stripped-down construct. We think digital credit is programmable across lots of dimensions, so there are a lot of ways to add value to it.

You can tokenize it, put it in a private fund, put it in a public fund, put it in a bank account. You can deploy it on a crypto exchange, on a neobank, on a real bank, or on a crypto network. You can program it to a volatility of zero or let it float up to a volatility of 10. You could program the liquidity to be continuous or daily or monthly, but you could also put in a quarterly lockup or an annual lockup in order to put more leverage on or create a different characteristic. You can program the yield from 5% up to 25% reasonably—some people might go beyond that, but we think 5% to 25% is reasonable.

Then you can convert the currency—you can create Great British pounds or euros or yen or Swiss francs with digital credit starting from STRC. When you think about all these different forms, the question is, do you want to create a yield coin like a digital money coin? Do you want to create a yield fund? Do you want to create an account?

Depending on what your assets are—if you are the biggest bank in Australia or if you are Deutsche Bank—you probably would do it one way. If you are a crypto exchange, you might do it a different way. The math is pretty straightforward. You start with 11.5% performance and ~3 vol right now.

If we are lucky, maybe we will be able to get our vol to two or to a one handle. That is the goal of our proposal to the shareholders. I doubt seriously we get below a 1.5 or a 1 vol. One vol is sort of what publicly traded money market funds look like right now.

Getting to zero vol takes a bit of work. One approach to add value is to down-strip the vol to zero, and maybe instead of 3 vol, 11%, you offer zero vol, 8%. That is digital money. The other approach is step it up: lever it three to one, pay 5% for the capital, and maybe you end up with something that is paying you like $35. Pay $10 on the capital, and you get a 25% yielding levered yield fund.

These are all opportunities. We are not going to do it ourselves. Our laser-like focus is to make STRC the deepest, most liquid, most stable, least volatile, highest Sharpe ratio credit instrument in the world. That is a mission.

There are a lot of crypto innovators—and you see right here on this screen a lot of very impressive companies—that are moving fast right now. Apex has had enormous success early on. Saturn is doing the same thing. Hermetica, Kraken, Ondo, Pendle, Spread, Strata—they are all doing very interesting things right now.

They are very innovative and moving about 10x faster than the TradFi complex normally moves on these initiatives. There are also interesting TradFi initiatives—things you can do in a traditional finance environment with a private fund or a public fund. We see those things happening as well. Eight weeks ago, there was no STRC in the DeFi industry.

In those eight weeks, we have rapidly grown to something like $270 million of exposure. This is just extraordinary—the rate at which money is flowing. Sometimes money is flowing into this complex a million dollars an hour. It is starting to feel like we may very well see more than a billion dollars of STRC enter the DeFi industry in the near future.

It is moving very fast, and it is very dynamic. Outlook and our vision: we are a structured finance company. We are taking raw capital—digital capital—40 vol, 40 ARR, $1.6 trillion market cap of Bitcoin. We are stripping the currency risk, reducing the credit risk, compressing the duration risk.

We are distilling a yield and damping volatility to create various instruments. Our greatest product and biggest success right now is STRC. It is taking a 71 vol down to a 3 vol, and we are targeting a 1 vol. Some important items to be aware of: the Bitcoin breakeven ARR—we calculate it all the time.

It is very significant. If Bitcoin grows more than 2.3% a year— that breakeven ARR—we can fund our dividends forever without selling a single share of stock. If Bitcoin does not grow at all forever, we can fund the dividends for 43 years. We publish this on our website and update it every 15 seconds.

If you go to the credit tab, you will see the Bitcoin reserve, the years of dividends (years of coverage if Bitcoin appreciates 0% a year), and the Bitcoin breakeven ARR—2.27%—updated every 15 seconds. There is a misnomer: most people think Bitcoin has to appreciate 11% or 11.5% for us to be successful or cover the dividend. Not true—2.3%. Or they think 30%—that is what we think it will do.

The number that really matters is 2.27%, the BTC breakeven ARR. It is also the inflection point where STRC issuance results in more Bitcoin being stacked by our company than the Bitcoin we use to pay dividends if we choose to pay dividends with Bitcoin. We do not have to sell a single share of stock. We could stop selling MSTR common stock right now.

We can fund the dividends with Bitcoin sales, and if STRC issuance is greater than that BTC breakeven number, not only will we fund the dividends forever, we will increase the amount of Bitcoin that we hold forever at the same time. If we were to sell $1.5 billion of STRC per year, we can sell Bitcoin to pay the dividends, buy more Bitcoin than we sell, grow our Bitcoin stack, and generate Bitcoin yield. We sold $1.5 billion of STRC in two days a few weeks ago. If STRC issuance equals 20%, that would equate to $12.8 billion of STRC sales this year.

We might exceed it, who knows, we might be less. At 20% issuance rate, the first-order model indicates we generate a BTC yield of 17.7%, we accumulate an additional 144,000 Bitcoin, and that is after we pay all the dividends by selling Bitcoin. Occasionally, some short narratives suggest that selling Bitcoin is bad for the business. We look at it like a real estate development company: you buy land cheap, sell some land dear to fund obligations, and buy more land.

Capital gains fund credit dividends. That is the essence of the business. We invest in digital capital—Bitcoin. The capital gains from the investment fund the credit dividends in perpetuity if the capital appreciates at that breakeven rate.

Sometimes we will sell a Bitcoin derivative because it is in the best interest of the company, but it is not necessary. For every single capital markets transaction, we are making these decisions not just every day, oftentimes every minute of every day, based upon all the fluctuating prices of the trading pairs. Right now, our BTC rating corporately is about 3.3. The duration of our liabilities is 10.9—that is the stochastic duration. The risk centered on 818 basis points works out to a fair credit spread of 61 basis points. 818 basis points of risk means that there is an 8% chance at the end of the duration of the liabilities that you are trading in a BTC rating of 1. 61 basis points is the credit spread a rational investor needs to be paid to offset the risk.

The assumptions we plug into the model: 10% BTC ARR—we assume that Bitcoin will perform about at the level of the S&P 500 over the last 100 years. We plug in 40 vol. Even with those estimates, what pops out is a credit spread of 61 basis points. The investment-grade credit spread is like 88. This is investment-grade credit even with very realistic pragmatic inputs.

If you are a Bitcoin max and you think Bitcoin is going up 30% a year, there is no risk. If you are a tech investor and think 20% a year, the risk is de minimis. If you are a trader and think 10% ARR, you get the 818 basis points. If you think 0% forever, the risk increases; if you think it is going down, the risk explodes.

You can calculate the risk with various Bitcoin prices and see the expected answers: Bitcoin price going up is good, Bitcoin vol going down is good. Some trades: if we sell $1 billion of MSTR stock and buy $1 billion of Bitcoin at 1.0x MNAV, it is dilutive—minus 48 basis points of yield, costing shareholders $310 million. As MNAV goes to 2.0 or 2.25, it becomes extremely accretive; at 2.0, you make $457 million in gains on the trade. It also improves our BTC rating and decreases risk—credit positive.

Funding dividends: if we fund $1 billion of dividends with Bitcoin, it costs $1 billion—12,763 Bitcoin loss, 156 basis points. That is pretty similar to funding the dividends with common equity at 1.22x MNAV. Below that breakeven, it is more expensive to fund with equity; you are better off to sell Bitcoin than to sell equity if the equity is trading weak. At 2.0x MNAV, it only costs 83 basis points.

Funding the USD reserve: it is more efficient at a high MNAV than at a lower MNAV; funding with BTC is constant from an equity point of view but extends duration and improves credit. Buying back converts: if we sell $100 million of STRC to buy $500 million of convertible bonds, we generate substantial BTC gains—22 to 63 basis points of yield depending on the specific convert—reduce leverage, stretch duration, slightly increase risk, and generate BTC gains. Selling Bitcoin to buy back common stock: below 1.22x MNAV, it is extremely accretive to swap BTC for MSTR. If the stock trades to 0.5x MNAV, swapping BTC for common yields 636 basis points—massive BTC gain.

The opposite is intuitive. We can also sell STRC—sell credit to buy MSTR—and over time do our own levered buyback; amplification on the equity. Even at 2.0x MNAV, you can generate 85 basis points of yield; at 0.5x MNAV, 800 basis points of yield. We can sell dollars to buy common equity—carrying the USD reserve is dilutive to equity but credit positive; we could swap dollars back for common at a discount profitably.

Scenarios: we can continue with our conventional strategy at 1.0x MNAV—selling credit and equity, using equity to fund dividends, holding USD reserve at 1.5 years—run a 10.6% BTC yield and accrete 263,000 sats per share over the next three years. At 1.22x MNAV, the yield expands to 12.2%. At 1.5x MNAV, 13.4%. At 2.0x MNAV, 14.6%.

Alternatively, we can fund dividends by selling Bitcoin and still grow Bitcoin holdings continuously—driving a 12.2% BTC yield and passing 1 million Bitcoin on the balance sheet in the next 36 months— with a slight increase in credit spreads and risk. If we fix the USD dividend and fund dividends with Bitcoin, we can get to a 14.7% BTC yield—again, a slight increase in credit spreads and risk—without accessing the equity capital markets at all. We can also retire all the converts: if we divert 20% of STRC issuance to retire debt, we retire all the debt in the next three years, net leverage goes to zero, duration goes to 15 years, and we run with a 12.4% yield while maintaining a 1.5-year USD reserve.

Key assumptions: on the equity side, 30% BTC ARR, 20% STRC issuance, 11% dividend rate; on the credit side, 10% BTC ARR, high vol. Over time, as confidence grows, credit spreads should compress, and the company has the option to lower the dividend to a floor of SOFR. SOFR has fluctuated between 500 basis points and 25 to 50 basis points historically. Considering those options, the stochastic cost of capital for STRC has to be modeled as something less than 11.5% and maybe more than the long-term rate—somewhere between 6% and 11.5%, a blended rate of about 8.75%.

Our capital markets principles: we are here to drive Bitcoin per share up, and we are doing everything we can to drive per share up. The best tool to do it is STRC. We see a world where we are debt-free—sooner rather than later. We will adjust amplification, credit metrics, USD reserves, and use of proceeds based on constant market feedback.

With Bitcoin—more than $60 billion—and $20 billion or more of daily liquidity in the Bitcoin market, we will not impair our asset by refusing to tap liquidity when it is in the best interest of stakeholders. We run the company in the best interest of all stakeholders—MSTR common equity, STRC creditors, and BTC investors—balancing interests to keep the concentric flywheels in harmony. When MNAV is expanding and the equity is healthy and outperforming Bitcoin, when the volatility of STRC is falling and liquidity is increasing, and when Bitcoin price is appreciating, that is indicia of success. That is what we have been doing and will continue to do, and we thank you for your support.

We will now open the call for questions.

Before we jump into the Q&A, I would like to share with all our investors that we are organizing a special Q&A for retail investors next week on May 13. You can scan this QR code if you would like to submit questions. We will share the link on X and share more details as well. With that said, let us jump into the Q&A. I would like to invite all our guests to turn on their cameras and get ready to ask some tough questions.

Let us get started with Peter Christiansen from Citi. Pete, please go ahead.

Thank you, CJ. Michael, I just want to take this call and how you have laid out all these scenarios and think about historically—pointing to last year at the end of the year—there was a false signal that Strategy Inc was selling Bitcoin, and it was taken negatively in the marketplace. Today, you outlined a lot of different optionality scenarios that Strategy Inc now has to optimize its capital stack. Should we take today's call as a signal to the market that, yes, Strategy Inc is willing to be more proactive with its capital stack, which may include the sale of Bitcoin—maybe for tax purposes or maybe for other optimization purposes—credit, what have you?

Should we take today's call as a signal that, yes, Strategy Inc is going to be more tactical with its capital stack going forward?

Yes, you should. I think the company got much healthier when we proactively began to utilize the equity ATM and we said it—we are going to do it; we are not ashamed of it; we will probably do it again. Then, when the company started proactively executing on the STRC credit ATM, we said we are going to do it; we are not ashamed of it; we are going to keep doing it; we think it is good; and we have a plan for it. At this point, to say we are turning on the BTC drive—we are not ashamed of it.

We have $65 billion. We have a $2.2 billion tax credit that is lying on the floor. We ought to go find a way to pick up the $2.2 billion. Just like with everything else, the more optionality we create and the more tools we have at our disposal, the better it is for the equity investors.

Yes, we will probably sell some Bitcoin to fund a dividend just to inoculate the market, just to send the message that we did it. Look: the company is fine, Bitcoin is fine, the industry is fine, the world did not come to an end. If you are a short seller and your thesis is the company's got to sell equity in order to fund the dividends, I would like nothing better than to rip your wings off.

I like that term, inoculate. Very well.

Thank you, Pete. I would like to invite Jeff Bock next.

Hello. First off, congrats to the team, particularly on STRC’s accelerating region. Thanks for having me here. My question is focused on understanding how macro factors may influence the firm's acquisition strategy, particularly in regards to interest rates.

As we all know, we are just a few weeks away now from Kevin Warsh’s official inauguration, and even though rate-cut odds are a little lower this year, Strategy Inc now does have an explicit growing interest rate sensitivity, as we just saw from the stochastic model. Hypothetically, if we see interest rates being lowered, STRC has this momentum that it will likely trade above par more aggressively given the nature of the floating-rate dynamic. The company then has a really interesting fork: you can either, one, issue more STRC and push the price back down to par, or you can use that moment to reduce the interest burden itself on what is outstanding.

There is a healthy tension between these two things. Can you help us understand that risk framework a little better to calibrate that particular trade-off—lowering the coupon versus selling STRC? It changes the Bitcoin acquisition velocity, but it also cuts interest expenses, especially in that lower-rate environment. Any specific input parameters that you might say take priority here in your calculation?

I will start, and then Phong or Andrew may have some comments. First of all, when macro indicators are moving against us, we have a headwind. Everything slows down. When we go to a restrictive monetary policy, that is bad for Bitcoin—really bad for Bitcoin.

It is bad for risk assets. Bitcoin is risk assets squared; MSTR is risk assets cubed. We are like big tech cubed, and Bitcoin is big tech squared. In a risk-off environment, you can see that.

In a risk-on environment or a more accommodative monetary economy, I expect you will see the opposite. Bitcoin will rally hard as squared; our equity should rally as tech cubed. The credit—presumably, we have more optionality if SOFR falls. Our bias is to grow the business responsibly but as rapidly as we can, and our bias is to grow Bitcoin.

If we have the ability to accelerate our capital raising and we can raise twice as much capital in a risk-on or more accommodative monetary policy, we will run the vehicle as hard as we can, but we will not run it so hard that the capital structure does not keep up with it. The circumstances under which we would slow down or throttle the credit would be if we go to risk-on and Bitcoin does not rally and our equity does not rally, but the credit rallies. If the demand for the credit triples and somehow Bitcoin does not react to the interest-rate macro environment and/or MSTR does not, then we might very well adjust the dividend rate down because we are getting too much demand for the credit.

By the way, I do not think that will happen. The likelihood that we go to a risk-on environment and Bitcoin does not rally is small. If Bitcoin rallies, our capital stack and collateral base expand, and then we can accommodate more credit. The rate of STRC issuance or credit sales is a function of the BTC growth rate or ARR.

If Bitcoin grows 30%, we can expand credit aggressively. If it grows 50%, we could go faster. The second order is the equity capital markets’ enthusiasm for our business model. If the equity capital markets looked at our business and said, you are going to run a BTC yield of 20% a year and I am going to give you a P/E of 10, I am going to give you a 200% premium, and now you are trading at 3x MNAV—that would be better than we are right now.

If the equity capital markets did that, our optionality increases as we grow faster. The countervailing view is, you have only been doing this for a year or two years, and the Lindy effect says I am only going to put a P/E of two on that. If we get a P/E of two, we could have a Bitcoin rally that gets us a collateral stack, but the equity does not go as fast, and that might govern the rate at which we run the credit engine. Bottom line: if the macro environment turns risk-on and Bitcoin rallies or equity rallies, it is go time.

We are going to go, and we are going to go with the credit. We want to see the MNAV expand to two, three, four, five, or six. Nothing would make me happier than to rip the faces off of all the skeptics and the shorts and drive the equity to the moon. The question you have to ask yourself is: is this company going to sell $10 billion of STRC this year, or 20, or 40, or 80?

The answer to how much we can sell responsibly is a function of where the Bitcoin price is, and to a lesser extent, how the equity capital markets react. If the equity capital markets are accommodating and supportive and Bitcoin rallies, the company has a lot of tools to manage the BTC rating and the collateral coverage. We can add more equity capital. We can put equity capital in the market fast—we were the biggest equity issuer last year and this year.

We could also take common equity out of the market if we decided to. We will look at the interest-rate forward yield curve, how Bitcoin performs—Bitcoin performing as big tech squared—the forward expectation curve of BTC, the forward vol curve. Bitcoin vol at 40 or 35 is different than vol at 50 or at 20. When Bitcoin vol falls to 20 or 25, you can lever these things and still have investment grade—lever two, three, four, five times more and still have investment grade. Bitcoin vol being 30 right now is not the same as institutional credit investors expecting Bitcoin vol to be 30 for a decade.

The forward yield curve, the forward vol curve, the forward price curve, the forward equity curve—all that gets discounted back, and we ask ourselves: what is the rational thing to do? At the end of the day, we want to drive the MNAV to the sky and drive the Bitcoin price to the sky and build STRC into the biggest credit instrument in the world. The higher STRC AUM we have, the more liquidity, and if we can get to $1 billion of liquidity for STRC, the vol will keep coming off, adoption will expand, and we get a network effect. If you gave me a choice—sell $500 billion of STRC and pay 11%, or sell $50 billion and pay 9%—knowing us, we want to gather the extra $100 billion of capital in a responsible way.

Our long-term view is Bitcoin is going to go up more than 11%—30%—and if we are wrong, it is 20%. Two hundred basis points will not make the difference. But if we gather an extra $100 billion of capital, the war to determine the future of credit and the war to determine the future of money is going to be fought and won with money, and we are going to get the money if we can do it in a responsible way. If you construct a tortured scenario where Bitcoin price is not reacting and MSTR is not reacting, but everybody wants the credit, maybe we would slow down the credit machine.

If equity investors are more bullish than credit investors, and BTC investors are more bullish than credit investors, the system solves its own problems—we are probably not going to be able to keep up with the expansion of our BTC collateral stack.

I will add one short thing to this, Jeff. The scenario you lay out is in a maturation of the digital credit market—five to ten years out—when digital credit is $3 trillion on a $300 trillion market. We would run into this issue of how to manage the demand for STRC. Ten months into it, our issue is not so much what interest rate we are paying or what the Fed does to interest rates.

The demand is going to be driven by awareness and marketing of the product right now. I do not think that scenario is going to be much of an issue for the short term.

Got it. Thank you for those thoughtful responses.

Thank you, Jeff. Next, I would like to invite Andrew Harte from VDIG.

Thanks for the question. I think the optionality in the business really came through clearly today. Shifting gears a bit: earlier in the slides, Michael, you talked about Bitcoin being digital capital and MicroStrategy being digital equity and STRC being digital credit. Then you also talked about innovators building digital money down the road—you called it like a layer three.

Considering STRC is going to be the foundation or the building blocks for digital money at some point as the market continues to mature, what do you think that solution looks like? Are you having conversations with innovators who are out there looking to build on top of STRC and create these digital money solutions?

Can you hear me?

Yes, I can hear you.

Okay. I think you see it with Apex and Saturn and Hermetica and a lot of the token issuers that are creating these yield coins that are powered by STRC. They are rapidly innovating. If you look at some of the DeFi protocols that are offering 2x, 3x, 5x, 10x leverage and looping—the Pendles of the world and the like—they are innovating rapidly.

We do not know the final shape. I think there are a thousand different combinations of digital money and digital yield. There is a different currency in every country—I think you can create various yield coins in different currencies. In Australia, you can deploy via a regulated bank or via a token that can sell in Australia or via an ETF taken public in Australia or via a private fund in Australia.

When you take the combination of currencies and platforms and containers, the sky is the limit. The people moving the fastest and most enthusiastically right now are the DeFi players, and people launching stablecoins that have to compete with Tether and Circle. The issue is: how do I convince people to put AUM or capital into my stablecoin? I need to create either a digital money—zero vol, 8% yielding—which is compelling, or a 25% ARR stake with a one-month lockup, looping three or four turns on the capital.

The market will decide who it trusts and what form it wants to buy, and it votes with its money. You can literally watch the money flowing every hour. I think you will see some ETF players come, but they will come slower because there is more regulatory friction. We hold out hope that we will see a neobank offer a digital yield account.

There is no reason why a bank or any neobank that is a mobile app could not say, “We will give you 8% on your money in this yield account if you want it.” Each one of these things is a different counterparty, a different platform, a different regulatory container. Eight to twelve weeks ago, we had none of these conversations going on, and now I see like three dozen initiatives. There is a Cambrian explosion. Check back in twelve more weeks—I think we will have some exciting news and partners.

Or just watch my X feed because I retweet some of the more interesting digital yield and digital money offerings—they are literally happening. A lot of times, people are inventing stuff and I am finding out at the same time you are, but the market is evolving in real time right now.

Thank you, Andrew. Next, I would like to invite Eric Balchunas. Eric, please go ahead.

Hi. Thank you for having me today. Great presentation. My question is maybe a little more philosophical.

It is about the changing ownership and identity of Bitcoin. According to River, in the past 16 months, businesses bought 560,000 Bitcoin. ETFs bought another 208,000. Governments bought 160,000. That is 1 million total Bitcoin by those entities. Meanwhile, individuals sold 730,000 Bitcoin.

Some have called this the silent IPO, and it is arguably the reason for that 45% drawdown. This changing ownership is being reflected at recent Bitcoin conferences where you see an increasing number of “suitcoiners,” which you highlighted in the slide on the government and the banks. I have noticed it has made some of the native Bitcoiners a little uncomfortable and conflicted regarding the original mission, given it was made to bypass governments and banks. To me, it feels like Facebook ten years ago when everyone’s parents joined.

Some people left the platform, although the user base did grow from 1 billion to 3 billion since then. I want your read on this transition—the mainstreamification of Bitcoin—and how important it is to keep the original base of investors along for the ride and keep the cypherpunk edge of Bitcoin as it goes more mainstream and gets adopted by companies, asset managers, governments, and boomers in general. Maybe it does not matter given the size of the institutional advisory market for the price to hit $1 million, but maybe it does. Just curious your thoughts.

Since we got in this space, there has been something like $1.4 trillion of wealth created for people other than the suitcoiners. I do not know who got the money, but we can trace 4% to BlackRock investors—they must have 50 to 100 million beneficiaries. You can trace almost 4% to our investors—we have 100 million beneficiaries. If you look at the corporates, they are representing thousands of institutions and tens of millions of investment accounts and hundreds of millions of beneficiaries, and the network is decentralizing.

It is distributing through them and maturing through them and finding its way into retiree accounts, insurance beneficiaries, trust funds, and three-year-old trust fund babies. Everybody in the world is getting exposure now. When everybody criticizes the centralization of the network, note that 85% of the network is held by others. It is held by the crypto OGs.

We do not know how many people that is, but it almost certainly represents fewer beneficiaries than the beneficiaries that rely upon BlackRock’s ETF or a common public stock. The corporations have been spreading exposure to Bitcoin by an order of magnitude or orders of magnitude. If you ask who owns the trillion dollars of Bitcoin that is not public—there are Chinese, Russians, Americans, Europeans, South Americans, Ukrainians, Iranians. When you wonder who is selling it, well, it is a trillion dollars of capital held by crypto OGs that are unbanked.

Maybe they are selling because the currency in Iran crashed; maybe they are selling because of some fear of a Chinese government memo. If the Chinese mined half the Bitcoin in the first 15 years, it is kind of impossible that there are not a lot of people with Bitcoin in China. Generally, the industry is maturing. It is rotating from the crypto OGs, but they are not going away.

We spent $6.062 billion to get to less than 4%. It is pretty expensive to not get to the other 96%. If you look at all the money that BlackRock and us put into this— the $150 to $200 billion of capital that flowed from the institutions—it did not get 90% of the network. Ninety percent of the network is still in global crypto OG hands.

I meet people everywhere in the world—someone slapping me on the back, thanking me for making them a lot of money—because literally people that you will never know who they are and will never announce it are sitting on $1.2 trillion of capital gains right now in the crypto ecosystem. I am not worried that the crypto ethos is being squashed. People with a trillion dollars probably have a lot of power to do what they will, and they are continuing to do it. The Bitcoin network is still highly decentralized.

The miners are decentralized. This is a global phenomenon. If anything, what is happening is the corporates are just powering up the network. We are the people that invest the $100 or $200 billion to drive the price from $10,000 to $80,000—or from $10,000 to $100,000. When we do it, 90% of the gain goes to other crypto actors, and they power the entire decentralized digital economy.

Good for them. That is good. The network is evolving in every direction simultaneously. I would take issue with anybody that says it is centralizing.

It is decentralizing. Today, a lot of people with money and power are going to support and defend this network because of the success of the corporations—whether it is Coinbase, BlackRock, or Strategy Inc. If you are going to lobby for things that are good for digital assets in Washington, D.C., it is not going to be a Chinese crypto pseudonymous billionaire hiding off the grid doing that lobbying. The trillion dollars of crypto OG money is not going to fix the accounting, fix the tax code, fix the banking system, and build the technologies that actually commercialize these apps to a billion people.

They are not going to give a bank account to a billion people that pays them 10%, and they are not going to put Bitcoin on every iPhone and every Android phone in the world. That is going to be corporate actors. The corporations are doing their part; the crypto OGs did their part. Everybody is in the system.

There is tension—healthy tension. We welcome it. The fact that someone will sell Bitcoin because they are in Iran and some missiles got launched— that is a feature, not a bug. People are trading based upon things that have nothing to do with the way Wall Street trades the S&P index.

That is what makes Bitcoin special, and that is why we welcome it as global digital capital.

Thank you, Eric. Next, we will invite Ramsey El Assal from Cantor. Hi. Thanks for taking my question tonight.

Michael, you mentioned that if Bitcoin volatility were to fall as the asset pricing accelerates, you would have some options and cards to play to preserve the attractiveness of the model. Can you elaborate further on what you meant there? And then separately, can you give us a quick update on the BTC security initiative? How has that been received, and have there been any developments on the quantum risk topic worth calling out?

Thank you.

I will answer the first and let Phong answer the second. If you go to our credit tab on our website and type in a vol of 40, you have a BTC rating at 3—things look investment grade. When the vol falls to 30, you can have a BTC rating of 1.5 and it still looks investment grade. When the vol falls below 30, your amplification can triple or quadruple.

As vol falls, credit risk falls. The forward volatility curve changes the view of credit investors and creates more demand among more traditional credit investors. It also changes the view of banking regulators and credit rating agencies. There is nuance: if vol is high, it is equity positive—options trading, liquidity, etc.

When vol falls, it is very credit positive. You are going to get performance through volatility on the equity side and performance through more amplification and more intelligent leverage as vol falls. Over time, it is reasonable that Bitcoin matures from 40 ARR/40 vol to 20 ARR/20 vol. It will always be more volatile than the S&P and more useful, but if you are a credit investor, you want to be sensitive to it.

The single number one issue in the market is: what is your forward volatility curve for Bitcoin? If you think Bitcoin is a 30 vol asset, everything we sell is investment grade and should be priced double or triple what it is. If vol starts to fall, there is no reason why there should not be a 10x bid on this stuff. You might lever 8 to 1 instead of 3 to 1. It will change the behavior of downstream players.

On security, Ramsey: we have started to bring together a group of folks—calling it the Bitcoin security program or council. The objective is to bring together institutions that represent custodians, exchanges, and large Bitcoin treasury companies who have a vested interest in the success of Bitcoin, and share a combined point of view on the potential risk and time horizon of quantum, what activities are underway in the development community, and how we get to consensus. Likely in the next month or so, we will share who is in that group and our combined point of view. Right now, there are a lot of divergent points of view, and we thought it would be useful to bring together those who are interested in the success of Bitcoin.

You will hear from the Bitcoin security program likely in the next month or so.

Excellent. Thank you. Appreciate it.

Thank you, Ramsey. Next, Jeff Walton. Please go ahead.

Thank you for including me, and I am very appreciative of your leadership. I have a two-parter. You spent a lot of the presentation talking about risk of the credit instruments. You have created a unique arbitrage surface between all of the different instruments and a unique incentive structure.

It has resulted in people buying and selling the instruments right below par on STRC and some of the other instruments. First, do you find that the market agrees with you on the forward-looking volatility curve? Are the instruments trading in tandem with each other? What is the biggest hurdle in communicating that relative risk profile?

Second, what is the biggest hurdle in accelerating the adoption of the digital credit instruments into the future?

I think all of the credit instruments are undervalued. So no, the market does not agree with us. If the market agreed with us, then STRF would be trading at $200 a share right now, not where it is. I think the equity is undervalued.

I think all the credit instruments are undervalued. I think all the bond instruments are way undervalued. We are embryonic. How do we fix it?

The Lindy effect and education. Partly, we tell the story. Partly, people will have to wait. After we have been in the market for three years, they will say, “It has worked for three years,” and it will be rated up.

We will be continually rerated as time goes by. We will not sit on our hands—we will communicate, publish, do investor outreach, and work with partners. As partners create compelling digital money products, that is helpful. How long will it take?

How long did it take before the market thought Amazon had a good business? It took ten years. Netflix was mispriced for many years; Apple was mispriced for many years. With a revolutionary business, the market will be skeptical.

It was skeptical of Google, Amazon, Nvidia, Apple—it will be skeptical of digital credit and digital treasuries for a while. Then there will be some point when it is not. We have to do the hard work of performing, laying down the track record, educating the market, and managing risk. The optimistic observation: the fact that the market is willing to buy more of STRC—that STRC is the most successful preferred stock in the world in this century—is an indication that maybe some people get it.

There are a lot of indicators that it is working and spreading fast and virally, but we still have a lot of work to do.

Thank you, Jeff. Next, I would like to invite Randy Binner from Texas Capital. Randy, go ahead.

Thanks. Michael, I think this one is for you. We have talked a lot about the Clarity Act. It is important for the broader crypto ecosystem—this bipartisan compromise is good news.

But for MSTR, for Strategy Inc, for your world, what would be the most important regulatory or policy change or impact? We have talked about banks and insurance companies being lobbied to recognize crypto as a statutory asset. Is it something like that? Follow-up: with so many arrows pointing in the right direction for crypto regulation and guardrails, do the midterms matter that much, and does the presidential election matter much from a policy and regulation perspective?

Bitcoin is in a safe harbor. There is global consensus as digital capital. MSTR is sitting in a safe harbor—it is a publicly traded, well-known seasoned issuer that came public in 1998, governed by securities laws that date back 100 years. STRC is in a safe harbor—it is a publicly traded preferred stock based on 100-year-old tax law and securities law, trading on the Nasdaq.

Everything that we are doing is sitting in a zone of regulatory clarity. I do not think we need any change in a law or rule to 10x or 100x. We can probably be 100x bigger from here without any change. We are not asking or looking for anything.

Clarity is important to the balance of power regarding token issuers, DeFi exchanges, stablecoin issuers, crypto exchanges, and between the crypto industry, neobanks, regional banks, and big banks. The significance to us is sentiment. Skeptics will gloat if it slows down and will flip to cheerleaders if it passes. There is not anything that we need.

It will change sentiment positively as it goes through. Long term, if I had a wish list: the Basel rules—if they are upgraded to recognize Bitcoin as legitimate collateral and not haircut it, it would be positive for banking adoption, especially credit adoption. Right now, there is still a bit of hair-cutting of it by credit rating agencies and very conservative regulated entities that want a gatekeeper or regulator to tell them it is okay. If you want an insurance company portfolio manager to buy the product without knowing what it is, it would be beneficial for the Basel rules to evolve and embrace Bitcoin as a legitimate asset.

Right now, we are selling to informed investors that want to buy the best thing. If we just slurped up 10% of private credit, that is $370 billion right there. We have plenty of runway for the next decade. My wish would be for the Basel rules to be fixed and for the world to recognize Bitcoin as legitimate collateral, pari passu to gold or other capital assets on banking balance sheets and regulated entities—then it should spread faster through banks as a reserve asset and through insurance.

But it is not necessary to us. We could be a multitrillion-dollar company and sell $400 billion of STRC and not have that fixed.

One thing I will add, Randy, is STRC is already a rapidly accelerating product in the category of digital credit, and that is without clarity as it relates to tokenization of securities, which I think will either be created through the passage of Clarity or rulemaking by the SEC. That will only accelerate things. We showed $270 million of layer-two tokenized STRC from companies like Apex and offerings by Kraken. Those are sold outside the U.S., not in the U.S.

When we get clarity, that will only accelerate things and accelerate layer development on top of STRC and digital credit overall. It is exciting to see what may come for something that is already an exploding asset class.

That is great. Thanks.

Thank you, Randy. Saving the best for last, James Lavish.

Thank you, CJ. Congratulations on your new role. Phong, Michael, Andrew, thank you for having me and allowing us to ask questions. First, congratulations on your success with STRC.

I am a believer in the digital credit world, and I appreciate you sharing the many levers you can now use to create value for the common shareholders while protecting creditors. With Strategy Inc’s energy and focus on STRC—which you have said before is a security you landed on through iteration—what do you see as the optimal future balance sheet structure maximizing the accretion of value for common shareholders? Would that include retiring most or all of the other debt and preferreds currently outstanding? Do you believe that is ultimately necessary to attract more of the largest institutions to invest in STRC in lieu of traditional yield-generating securities?

We think we want to be debt-free completely. All six of the converts may go away by either swapping them for STRC, swapping them for equity, or paying them off with cash. There is consensus on that. There is consensus that STRC is the killer strong credit instrument.

The jury is still out on the other four credit instruments. They are all long-duration credit instruments and represent important optionality for the company. Our policy will be to retire the six convertible bonds, promote and polish the jewel in the crown—which is STRC—and then watch and nurture the other four, improve them as we can, and observe whether or not they are material in generating demand. If I was designing a Bitcoin treasury company from a clean sheet of paper, the company would consist of one common equity, one monthly (or semimonthly) variable preferred equity, and a big stack of Bitcoin—and nothing else.

That is my advice to anybody that asks. The other things are interesting—maybe—but not necessary. We will watch them. It is very difficult to create a publicly traded instrument like STRF, STRD, STRK, or STRE, so we will not retire them because it represents giving up billions of dollars of optionality.

But what is critical for us is to manage the common stock carefully to get the MNAV up and the premium up, manage the Bitcoin stack, and manage the monthly variable-rate preferred—the digital credit instrument. Those are the things that really matter.

Thank you, everyone. That brings us to the end of the Q&A session. I would like to thank everyone for their questions and all the attendees for joining and listening to the earnings call. I will hand it back to Phong for any closing remarks.

I want to first thank everybody for attending our earnings call. I know there are tens of thousands of you out there, spending two hours and fifteen minutes of your evening with us. We find that to be very gracious and flattering. Many of you are shareholders of our common MSTR and our perpetual preferred STRC.

As many of you know, we have a shareholder vote coming up that is due early June to primarily modify STRC to go from, as Andrew mentioned, a monthly dividend to a semimonthly—twice a month—dividend. We believe this is beneficial to our shareholders. As we mentioned, one of our principles is to make STRC better and more attractive. We would appreciate you all voting early so that we can start to tabulate the votes, and this is how you can do it.

If you have questions on how to vote for STRC and for the common, you can also go to our website. I really appreciate your time. Thank you for all the interest and the attention, and we will talk to you again—if not before then—at our next earnings call three months away. Thank you all.