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Ok, why is $STRC up 2.3% today while $BTC is down 1.4%?

It entirely comes down to one metric and the implications for that metric, "Net-Bitcoin".

@strategy updated their website with a huge new array of metrics, and very importantly, they've changed the mNAV metric (although the number itself is still at 1x mNAV).

Before, they were using an EV/NAV calculation, which essentially just added the total value of the debt + common equity, and divided it by the market value of the bitcoin. The main problem here is that there was no direct way to account for the cash in the NAV. It was just showing the bitcoin.

Now, they are using a Net-Bitcoin metric for the denominator. Net-Bitcoin takes the market value of the total bitcoin stack and subtracts the notional value of any debt that is currently out-of-the-money (currently all of it) and the prefs. For their new mNAV calculation, they divide the value of the common equity (MSTR) by the new Net-Bitcoin metric.

The alpha is in the details here.

The bitcoin is being valued at the MARKET VALUE, while the liabilities - debt and prefs - are being valued at the PAR VALUE.

So what?

This means Strategy can sell $1 of bitcoin and buy back $1 of debt or pref, but since most of the debt and prefs are trading at a discount to par, the buy back actually means that Net-Bitcoin goes UP, because you bought back $1 of par value debt or pref for $0.80 or whatever. They immediately book a 25% gain on that swap. Now, Net-Bitcoin-Per-Share just went up. Magic.

Now why would they do this?

It's pretty clear and they've been telling us quite vocally. "We are active managers now". "We are committed to having STRC trade between $99 and $101."

They want to get the price of STRC back to $100, come hell or high water. STRC is their flagship product and they want it to be working as intended.

This new valuation framework now effectively forces them to do buy backs if they are being rational actors.

It's unclear if they will buy back some converts first or if they will go straight to buying back STRC, but I would be completely SHOCKED if buy backs didn't start next week or maybe even already happened.

The big question is, where will they get the cash for the buybacks?

Two places, selling BTC or selling MSTR.

BTC is more liquid than MSTR and they've shown that they can sell a few hundred million in a week easily without impacting the price at all. Selling BTC also perfectly fits into the "magic" dynamic I highlighted earlier.

MSTR though has some advantages too. For one, they don't get skewered with the narrative that they are dumping huge amounts of BTC at the bottom. The interesting thing about the new framework here is that they can raise $0.8 of MSTR ATM and retire $1 of liabilities (for example), meaning Net-Bitcoin-Per-Share goes up by 25% immediately. So, they could in theory sell MSTR below 1x mNAV and still have Net-Bitcoin-Per-Share growth.

My guess is that they'll maybe do a little of both.

The market is clearly sniffing this dynamic out though, which is why STRC is up so much today, while BTC is down. Interestingly, MSTR traded pretty well today relative to bitcoin as well, which leads me to believe that MSTR holders also like the dynamic.

The bet for MSTR holders is that this will be short term pain (possibility of selling a little MSTR below 1x mNAV) for longer term gain as the price of STRC gets supported and the Digital Credit narrative gets back on track.

One last thing to note here as well. As of June 30, there were 3.67M shares of STRC sold short. At current volume levels, that's over 3 days to cover. This is decently shorted and the short interest could have risen in the last 24 days.

To get STRC back to par, Strategy doesn't need to buy back all of the traders wanting to sell below par, they just need to restore confidence in the market and the market will do the rest.

I'm very interested to see what they announce Monday morning, and even more interested to see what they announce the following week, which happens to coincide with the monthly update where they would normally increase the dividend.

To be completely clear, I have no inside knowledge here and could be completely wrong. This is just me doing the research like everyone else.