The Safer It Falls
Strategy's credit calculator grades every preferred as safer the further its price drops — because the length of the test is set by the market price.
The question. Strategy (MSTR) has relaunched its bitcoin-credit calculator (strategy.com/credit/risk). For each preferred series it shows a "BTC Risk" — the modelled chance the company's bitcoin stops covering that claim — and a "BTC Credit" spread built on it; a new tab turns the market price into an "implied" bitcoin return. Holders of STRC, STRD, STRK and STRF will read these as a grade. Before using a grade, check two things on the page itself: does a junior claim ever grade safer than the senior one in front of it, and does the same security grade safer when its own price falls?
The answer is yes to both, for one reason. The calculator tests each security over a window it calls "Duration," and that window is computed from the security's market yield. A lower price means a higher yield, a higher yield means a shorter window, and a shorter window gives bitcoin less time to fall below the cover. The cheaper a preferred gets, the shorter its exam, and the better its grade.
The company's case, first. Publishing the model at all, with its definitions and most of its formulas in its glossary, is rare and useful; the floors and coverage multiples are honest balance-sheet arithmetic, and this note relies on them. Its disclaimer lists, in its own words, what the model leaves out — cross-defaults, other liabilities, the $101 call on STRC — and states that it assumes every dividend is paid in full when scheduled. Macaulay duration — the value-weighted average time at which a holder receives a security's cash flows — is a standard measure, and a preferred bought at a higher yield has a shorter one, so a shorter window is a defensible convention. The spread column keeps the securities in seniority order (STRD 81 bps, STRK 73), and the page says plainly that a gap between market and model "does not mean any security is mispriced." Tested here: whether the convention preserves seniority in the probability it labels; whether a security's own grade is independent of its own price; whether the spread column escapes the problem; and whether Implied BTC ARR can be read as the market's view of bitcoin. Not tested: whether any Strategy spread is too wide or too narrow, what bitcoin will return, or anyone's intent.
The page, and the inversion
| Security (seniority order) | Price | Duration (yrs) | BTC Floor | BTC Rating | BTC Risk | BTC Credit |
|---|---|---|---|---|---|---|
| STRF | $103.83 | 10.6 | $2,332 | 35.8x | 0.18% | 2 bps |
| STRC | $99.56 | 8.4 | $13,141 | 6.4x | 4.08% | 50 bps |
| STRE | €79.13 | 8.2 | $14,183 | 5.9x | 4.51% | 57 bps |
| STRK | $74.66 | 9.6 | $15,837 | 5.3x | 6.72% | 73 bps |
| STRD | $72.98 | 7.5 | $17,492 | 4.8x | 5.95% | 81 bps |
How to read it. One row per preferred, in the calculator's own seniority order: each row's floor includes the claims of every row above it, so floors and BTC Risk should both rise down the table. All columns are the page's own outputs on 29 September at its default inputs (bitcoin $83,464, volatility 40%, return 10%). The one thing to see: STRD's BTC Risk is lower than STRK's although its cover is thinner.
If bitcoin is below $15,837 it is also below $17,492, so STRD cannot be less likely to lose its cover than STRK. The two percentages answer different questions, and the difference is the Duration column. The page shows the same inversion at every input setting we tried (40%/0%: STRK 23.5% vs STRD 19.2%; 60%/0%: 51.3% vs 45.1%).
Why: the exam gets shorter as the mark gets worse
STRD pays $10 a year. At $100 that is a 10% yield and a 10.3-year window; at $72.98, 13.7% and 7.5 years; at $50, 20% and 5.3 years. Nothing about the claim or its floor changes — only the years the model gives bitcoin to fall below $17,492, and large falls need time. Macaulay duration measures how long the holder's money is at work, and for that it is right. The problem is using a measure of the holder's payback period — set by the market price of the security being graded — as the horizon for the collateral's risk. It is as if the student with the lower mark last time sits a shorter paper this time: fewer mistakes, not more knowledge.
The same security at different prices — STRD, floor $17,492, all other inputs at the page's defaults
| STRD price | $100 | $80 | $72.98 (29 Sep) | $60 | $50 | $30 |
|---|---|---|---|---|---|---|
| Duration (yrs) | 10.3 | 8.3 | 7.5 | 6.3 | 5.3 | 3.3 |
| BTC Risk | 8.37% | 6.63% | 5.95% | 4.57% | 3.44% | 1.20% |
| BTC Credit | 85 bps | 83 bps | 81 bps | 75 bps | 67 bps | 37 bps |
| "Implied BTC ARR" (reconstructed) | −3.8% | −9.4% | −11.8% | −17.5% | −23.6% | −45.7% |
How to read it. One security; only its market price changes across the columns. Duration follows from the price by the page's formula; BTC Risk and BTC Credit are the page's formulas at that Duration (the 29 September column reproduces the page). Implied BTC ARR is the bitcoin return the Pricing tab would report the market is assuming at that price, reconstructed by the glossary's formula with the risk-free yield held at its 29 September value (5.15%); the page itself displays only the current-price figure. The one thing to see: as the price falls, the modelled risk and spread fall and the "market pessimism" rises.
The spread column does not escape it: across securities it keeps order because a smaller probability is divided by fewer years; within one security it falls with the price and, at the page's defaults, never leaves the "investment grade" band. For an STRC holder: if STRC fell from $99.56 to $80 with nothing else changing — STRC's monthly rate reset is designed to encourage trading near par, so the example isolates the formula rather than a likely state — the page would show its risk falling from 4.08% to 2.81% and its spread from 50 to 42 bps — the market saying riskier, the calculator saying safer, both reacting to the same price.
What to take from the page
Use the floors, the BTC Ratings and the claim stack: they are the balance sheet arranged by rank, reproduce from the filings, and update live. Leave any comparison — between securities or over time — that uses BTC Risk, BTC Credit, Derived Price or Implied BTC ARR; each carries a window set by the security's own price. The fix is small: one horizon for the preferred stack, leaving the floors, ratings and formulas untouched. At a common 9.6 years STRK grades 6.7% and STRD 7.8% — the order the floors already gave. Even then, a one-date test understates a security with no maturity: on the page's own inputs bitcoin touches STRC's floor at some point within 8.4 years with about twice the probability shown, and at some point over a perpetual's life with 63%. Touching the floor is not a default; it is the state in which the share-sale program is most likely to be impaired and the dividend would fall on the cash reserve.
Two facts a holder should also hold: the model's BTC Rating, BTC Risk and BTC Credit appear in the free-writing prospectuses used to sell STRC (filed 3, 14 and 24 August), so the metric is part of the offering record, not only the website; and in the week of 21 September the company itself bought about a fifth of STRC's trading volume, so the market price the new tab reads back is partly the company's own bid.
What would change our view. If the page's Duration for a series stops tracking that series' price, or the company publishes one fixed or perpetual-life horizon for the stack, the mechanism described here no longer exists and this note retires. Mirror: if the Durations keep tracking prices through the next move of 10% or more in any series' price, in either direction, the reading stands. If the company documents another adjustment that reproduces 5.95% and 6.72% without the horizon difference, the explanation here is wrong even if the inversion remains.
Sources & Method
Page outputs, glossary formulas and disclaimers read from strategy.com/credit/risk, /credit/pricing and /notes on 29 September 2026 at bitcoin $83,464, at four input settings; verbatim transcription in data/dashboard-check-2026-09-29.md. Duration = (1 + y/n)/y with y = annual dividend ÷ price (page glossary). BTC Risk = Φ([ln(F/S₀) − (ARR − σ²/2)·T]/(σ√T)), BTC Credit = −ln(1 − BTC Risk)/T — the construction reverse-engineered in the August note, with the drift corrected to the arithmetic convention on 13 September; at the page's rounded durations it reproduces the 29 September page within a quarter of a percentage point; Implied BTC ARR by the glossary's published inversion, reconstructed across the price ladder with the risk-free yield held at 5.15% (a duration-matched yield moves the $100 figure to about −3.6%); touch probabilities by the reflection principle for the same price model (data/inversion_model.py, data/first_passage_2026-09-29.py, outputs archived). Prices: official closes 29 September (STRF $103.83, STRC $99.56, STRK $74.66, STRD $72.98); STRE €79.13 from the page. Holdings 847,666 BTC, USD assets $6.02B, STRC repurchases 1,534,530 shares against 7,146,449 traded (21–25 Sep): Strategy 8-K of 28 September 2026 (acc. 0001193125-26-403417) and daily bars; FWPs: EDGAR acc. 0001193125-26-330767, -352145, -363557. The 0%-return case is the no-assumption case, not a view; nothing here is a view on bitcoin's return or on the fair spread of any Strategy security. Prior note relied upon: The Solvency Map Is Not the Credit, 12 Aug 2026.
Disclosures
Methodology & data. This note evaluates a disclosure tool published by Strategy Inc.; all "model" figures are the tool's own outputs as read on the date stated, and all "market" figures are exchange closes as dated. The formulas used to reproduce the tool's outputs are the ones the tool's glossary publishes; price-ladder and common-horizon figures are conditional arithmetic on those formulas with one input changed, not forecasts. "BTC Rating," "BTC Risk," "BTC Credit," "Derived Price" and "Implied BTC ARR" are Strategy's labels for its own illustrative metrics, not ratings from any rating agency.
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