Investment Gems

I just watched one of Saylor’s talk on Strategy’s (MSTR) financial engineering. In the following paragraphs, I will try to break it down. Michael Saylor talk unfolds like a step-by-step blueprint for turning Bitcoin into a mainstream financial product—something familiar enough for retirees and yield-hungry investors, but still powered by BTC under the hood. Here’s how it all breaks down.

A Primer on Strategy

First, Saylor introduces the idea of a “BTC rating,” which is really just a way of saying how much more bitcoin MicroStrategy holds compared to the liabilities it issues. Imagine pawning a $10,000 Rolex for a $1,000 loan—the lender feels safe because they’re holding something worth 10x the loan value. That’s basically what MicroStrategy does: they might issue a $100 million bond backed by $1 billion in BTC. That 10:1 ratio gives a cushion, or what he calls “over-collateralization.”

Then comes the risk math. Saylor says you can measure the risk of default the same way traders price stock options—using the Black-Scholes formula. Default only happens if Bitcoin crashes so hard that the value of the collateral falls below what’s owed. It’s the same kind of calculation insurance companies use to figure out how likely your house is to burn down. In this case, the “fire” is Bitcoin tanking below a certain price before the debt matures.

Once you know how likely that crash is, you can calculate what kind of return investors would need to take that risk—the credit spread. The more bitcoin you hold relative to your debt, and the less volatile BTC seems, the lower the risk, and the less return you have to offer. That’s why MicroStrategy can dangle 8–10% coupons and still keep it attractive for themselves—especially when regular investment-grade corporate bonds are yielding under 5%.

Strategy’s Execution

Saylor has already turned this idea into actual financial products. Strategy (formerly MicroStrategy) has launched three types of preferred shares:

STRK (“Strike”) offers 8% annual payouts, lasts forever, can convert to stock, and gives holders a chunk of the upside—about 40% of any gains if MSTR’s stock pops.

STRF (“Strife”) pays 10%, is also perpetual, but can’t convert to stock. It’s senior to STRK, so it gets paid first and is geared toward income-seeking investors.

STRD (“Stride”) is another 10% option, but non-cumulative—meaning if Strategy skips a dividend, they don’t owe it later. That makes it riskier.

All three trade on Nasdaq, so you don’t need a crypto wallet or any BTC know-how to invest. You can buy them through a regular brokerage account, just like any stock or bond.

Why would retirees or conservative investors care? The yields are high—8 to 10%—in a market where safer bonds are still under 5%. Plus, the products are over-collateralized with Bitcoin, which Saylor claims has historically compounded at 30–55% per year. And for U.S. investors with lower incomes, the dividends could qualify for the favorable 0% or 15% tax rates under the QDI (Qualified Dividend Income) rules. Saylor’s pitch boils down to: “You don’t need to understand Bitcoin to earn from it.”

So why does Saylor call this whole thing a “killer app” for Bitcoin? Because if BTC keeps climbing faster than the coupon payments, Strategy can 1) pay the income to investors, 2) issue more preferred shares at attractive prices, and 3) use that fresh capital to buy even more bitcoin. It’s a feedback loop—more BTC means more ability to raise money, which means more BTC. He calls it an “orthogonal” financial system, meaning it moves independently of traditional BTC buyers or MSTR stockholders. It’s its own lane.

Conclusion

Has Saylor discovered the infinite money loop?

Unlikely. This whole exercise is not risk-free. Bitcoin has dropped more than 80% in past cycles. If something like that happens again and drags on, the extra cushion of BTC backing these instruments could vanish. There’s also the liquidity issue: the dividends aren’t guaranteed unless declared by the board, and in STRD’s case, missed payments are gone for good. And while these securities are public, they don’t have official credit ratings—though if they did, many expect they’d fall into “junk” territory, as Barron’s has pointed out.

At the heart of it, Saylor’s doing something pretty straightforward but clever: he loads up on bitcoin, issues smaller chunks of preferred stock or debt backed by it, prices the default risk like an option, then offers investors juicy yields that are still affordable because of the BTC cushion. The leftover value—whatever’s not paid out in coupons—goes to common shareholders, potentially helping MSTR outperform Bitcoin itself over time.

In short, he’s re-engineering how people can invest in Bitcoin without touching Bitcoin. His goal? Turn BTC into a yield-generating asset for the traditional financial crowd. Whether the whole plan works, though, comes down to one thing: Bitcoin has to keep going up in the long run. In other words, Saylor has found a reflexive process and is playing with it.