Digital credit, a new asset class backed by Bitcoin, faced its first real stress test this week as MicroStrategy's STRC preferred stock crashed below its $100 par value, falling to an intraday low of $82.53. STRC, designed to trade near par and pay a high variable dividend, is used by Strategy (formerly MicroStrategy) to raise cash for buying more Bitcoin. The decline, driven by leveraged unwinding, capital competition from AI listings and IPOs, and a broader DeFi TVL drop from $170B to $72B, has led critics to declare the model dead. However, Strategy holds enough cash to cover dividends for seven months and Bitcoin reserves for decades, and the asset class is less than a year old. Meanwhile, Bitcoin on-chain data tells a different story: CryptoQuant's Network Activity Index broke above trend for the first time since mid-2024, with daily transactions and average transactions per block near record highs. Much of the activity comes from low-value transactions via OP_RETURN, but the overall signal points to network expansion despite price declines near $62,400. The divergence between falling prices and rising activity is the key tension to watch.

Key facts

• STRC preferred stock fell to $82.53, 18% below $100 par value.
• Strategy paused new STRC sales, limiting Bitcoin purchases.
• Bitcoin Network Activity Index broke above trend for first time since mid-2024.
• 80% of daily Bitcoin transactions are below 0.01 BTC, driven by OP_RETURN.

KeyAudit data perspective