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Here’s a neat trick: hold hundreds of thousands of Bitcoin, borrow against it instead of selling it, and never trigger a taxable event. That’s essentially what Strategy Inc. has been doing, raising roughly $16 billion in total debt and preferred obligations this year without owing taxes on any of it.
Selling Bitcoin creates a capital gain. Borrowing against Bitcoin does not. By issuing a mix of equity, convertible debt, and preferred stock rather than liquidating its crypto holdings, Strategy has built a capital machine that feeds on leverage instead of realized profits.
How the money machine works
Strategy, which rebranded from MicroStrategy in February 2025, has raised approximately $21 billion through various financial instruments. That includes common equity issuances, convertible debt offerings, and a notable $2.5 billion perpetual preferred stock issuance.
The perpetual preferred shares, branded as Stretch (STRC), offer investors an approximate 11.5% dividend yield.
The proceeds from all of this capital raising flow primarily into one destination: more Bitcoin. Strategy holds hundreds of thousands of BTC, making it by far the largest corporate Bitcoin holder on the planet.
When a company issues debt or equity, those proceeds aren’t income. They’re capital raised through financial instruments with obligations attached. No Bitcoin changes hands, no gain is realized, and no tax bill shows up.
The Digital Credit Capital Framework
Strategy’s Digital Credit Capital Framework allows for regulated sales of up to $1.25 billion in Bitcoin. That capital is earmarked specifically for sustaining dividend payouts to preferred shareholders and bolstering cash reserves during market volatility.
The broader product suite, collectively referred to as Digital Credit products, is designed to attract yield-seeking investors who want Bitcoin exposure without actually holding Bitcoin.
The bull case and the bear trap
Proponents of Strategy’s model, including co-founder Michael Saylor, argue this approach creates a new asset class. The thesis is that a digital credit market built on Bitcoin-backed instruments could eventually scale into the trillions.
But this entire structure is a leveraged bet on Bitcoin’s price trajectory. Strategy’s total obligations sit at around $16 billion. If Bitcoin enters an extended bear market, the value of the collateral shrinks while the obligations remain fixed. The company doesn’t have a traditional software business generating meaningful cash flow to fall back on.
A sustained drop in Bitcoin’s price could force Strategy to sell BTC at depressed levels to service its preferred dividends and debt obligations.
The 11.5% yield on Stretch shares isn’t free money. It’s compensation for taking on concentrated exposure to a single, volatile asset through a leveraged corporate structure.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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