Good afternoon, everyone, and thank you for joining us for Strategy's third quarter 2026 earnings webinar. I'm CJ, Head of Investor Relations at Strategy. Joining us today are Andrew Kang, Chief Financial Officer, Phong Le, President and Chief Executive Officer, and Michael Saylor, Founder and Executive Chairman. Thank you for joining us for Strategy's third quarter 2026. We'll begin with approximately 60 minutes of prepared remarks, starting with Andrew, followed by Phong and Michael. We'll then move to a 30-minute live Q&A. Before we begin, I'll briefly cover our safe harbor statement. Some of the information we provide in this presentation regarding our future expectations, plans, and prospects may constitute forward-looking statements.
Actual results may differ materially from these forward-looking statements due to various important factors, including fluctuations in the price of Bitcoin and the risk factors discussed under the caption "Risk Factors" in Strategy's quarterly report on Form 10-Q filed with the SEC on August 3rd, 2026, and the risks described in other filings that Strategy may make with the SEC. Except as required by law, we assume no obligation to update these forward-looking statements, which speak only as of today. With that, I will turn the call over to Andrew Kang, CFO of Strategy.
Thank you, CJ. Q3 was an exceptionally strong quarter across all parts of our business. We now hold 848,517 Bitcoin and recorded a record $21 billion fair value gain on our Bitcoin holdings in Q3. MSTR share price increased 76% during the quarter, and our market cap rose to $62 billion as of October 23rd. STRC's one-month volume-weighted average price was $99.27 as of the closing markets on October 23rd. As we speak today, we are just one penny away from par. Our combined Bitcoin and dollar reserves represent 49 years of interest and dividend coverage, strengthening the credit quality of our digital credit platform. Q3 marked our 25th consecutive quarter, more than six years, of building a consistent and ongoing track record of adding more Bitcoin to our balance sheet.
Since Q3 of 2020, our holdings have grown from approximately 38,000 Bitcoin to the 848,517 Bitcoin, accounting for 4% of all Bitcoin that will ever exist. Strategy remains the largest institutional holder of Bitcoin in the world. Our Bitcoin holdings exceed that of IBIT, that of the largest nation states, other ETFs, and all other major DeFi institutions. We aim to actively manage our holdings, along with our cash reserves, to benefit both our long-term common stock shareholders and our digital credit investors. The sheer scale of our reserves gives us a market-leading advantage to actively manage our strategy and goals through both bull and bear market cycles. Our treasury assets have grown from approximately $54 billion at the end of Q1 this year to $74 billion in this comparison.
That makes Strategy the seventh-largest treasury among S&P 500 companies when we include all cash and Bitcoin on our balance sheet. As you know, the number 21 has a great deal of significance for us. We all know that there will only ever be 21 million Bitcoin in existence. In this last quarter, we recorded an approximately $21 billion in fair value gain on our digital assets in the third quarter. We started Q3 with about 846,000 Bitcoin valued at approximately $50 billion. During the quarter, Bitcoin's price increased from approximately $58,700 to close around $83,600, adding $21 billion in value. We also added a net 1,666 Bitcoin during the quarter. As a result of the recent rally in Bitcoin price, at the end of Q3, we recorded a $20.9 billion fair value gain on digital assets, and ended September with over 847,600 Bitcoin worth approximately $71 billion.
For the third quarter, we reported a record $20.9 billion of operating income, $19.1 billion of net income, and $44.75 in diluted earnings per share. This was the highest operating and net income for any quarter in the history of the company. This milestone achievement for the company highlights the resilience and strength of our capital base and balance sheet, which allows us to weather the storm through bear markets, but also readies us for exponential growth in bull markets. Bitcoin per share has grown from approximately 56,600 sats at the end of 2020 to over 187,700 sats as of October 23rd, reflecting a CAGR of approximately 23% over that same period.
Year to date, Bitcoin per share is 3.7% lower as we effectively deployed and managed through our capital management framework with a focus on strengthening the underlying credit of our capital structure. As we enter the next stage of Bitcoin price appreciation, we will be further positioned with a stronger capital base and a more robust reserves to amplify BTC yield in the long term. We raised approximately $5.4 billion of total capital during Q3, bringing the total year to date capital raise to $21.2 billion. We raised $22.6 billion of capital in 2024 and $25.3 billion in 2025, importantly reflecting our effective and impactful access to the capital markets in both rising and falling Bitcoin cycles. During Q3, digital assets increased from $49.7 billion to $70.8 billion, reflecting Bitcoin price appreciation and the net addition of Bitcoin during the quarter.
Cash and short-term investments increased to just under $5.9 billion, including $5.8 billion of total USD assets at the end of Q3, which provides more than sufficient liquidity to meet our interest and dividend payments, strengthen our overall credit quality, and provide liquidity for general Bitcoin treasury needs. Our preferred equity ended the quarter at $13.1 billion, down from the previous quarter with the execution of our Stretch open market repurchase program. Common equity increased to $55.4 billion, bringing total equity to $68.5 billion, up $23.2 billion, or 51% during the quarter. Our treasury assets as of October 23rd were approximately $74 billion, consisting of $68.9 billion of Bitcoin and $5.1 billion in USD assets. After taking into account $6.7 billion of convertible debt and $13.3 billion of preferred stock at their notional amounts, our net reserve is approximately $53.9 billion, or approximately $67.3 billion net of the out-of-the-money converts.
Our NAV is currently 1.15x, amplification 1.28x, with a low net leverage of approximately 2.4%. Our USD assets provide 3.4 years of interest and dividends coverage at current payment obligations. We have approximately $6.7 billion of total convertible debt outstanding, compared with the $69 billion of Bitcoin and $5.1 billion of USD assets, representing a BTC Rating of 42x. Four of the six converts are currently trading above par. For the two that are at the moment below par, the earliest put date remains significantly in the future, not until March 2028. We have substantial asset coverage and the staggered put maturity schedule gives us ample levers to effectively manage these obligations in the future. We now have 17 equity analysts covering us, all which carry buy ratings, an average MSTR price target of approximately $248, and an average published Bitcoin target of approximately $111,000.
I am pleased to announce that our shareholder proposal to move our preferred equity dividends to daily record and payment dates has been resoundingly approved by our shareholders. The final vote reflects 99.3% of approvals of votes cast in support of the amendment. Daily dividends for Stretch will begin on November 1st record date with a November 2nd payment date. Strife, Strike, and Stride are scheduled to follow with a January 1st record date and a January 4th payment date. Dividends will accrue on every calendar day, including weekends and holidays, with payment on the next business day. The overall annual dividend amounts remain unchanged and are not impacted as a result of this enhancement. Smaller, more frequent payments are designed to reduce volatility, improve liquidity, broaden investor demand, and get cash to investors sooner.
Calendar day accruals also make Stretch and our pref's better suited to the future of tokenized products and increasingly around-the-clock markets. Thank you to everyone who voted in favor of this change. Finally, as announced earlier today, I will be stepping down as Chief Financial Officer effective November 5th for personal reasons. It has been an honor to serve as Strategy CFO for the past four and a half years, and to be part of such an extraordinary period of growth and innovation. I am extremely grateful to Michael, Phong, and the board for their trust and support. To all of our employees, thank you for your hard work, perseverance, and dedication. To the entire finance team, a special thank you. It has been a privilege to work alongside each of you, and I am incredibly proud of what we have accomplished together.
To our shareholders, analysts, and everyone who has joined us over these last 18 quarters, thank you for your time, your engagement, and your support. It has meant a great deal to me. For the last time as CFO, I will turn the call over to Phong.
Thank you, Andrew. We will miss you, and I do appreciate your four and a half years of service to Strategy. You've seen the company through great times and also through a couple bear markets with a steady hand, and I wish you well in the future. The plan going forward throughout the course of 2026 is for myself to step back into the CFO and Principal Financial Officer role. Starting in January 2027, we will split the CFO role between our software and our Bitcoin businesses, which are quite different. Stepping into the Principal Financial Officer role covering our software business will be a longtime veteran of Strategy, Reza Virasteh, who currently runs operations reporting to me and has previously been a part of the finance leadership team running FP&A. He knows our software business inside out and will do a great job overseeing that.
The Principal Financial Officer of our Bitcoin business will be myself, and also I will continue to be the CEO of the company. Looking forward to wearing those dual hats and looking forward to continuing to lead with strong folks in our Bitcoin business that you are all familiar with. CJ here, who runs investor relations and product, and Shirish, who runs our treasury, will report to me directly. I think for all intents and purposes, the transition will be seamless to our shareholders, our investors, our analysts, and our employees. I am looking forward to a bright future for the company. Speaking of bright futures, I will cover off on our digital equity strategy and our digital credit strategy with a recap of Q3 and 2026 year to date, and why I believe we have a very bright next year ahead of us.
Then I will hand it over to Michael, who will cover our digital capital and Bitcoin overall outlook and just general strategy for the company. First, let us talk about digital equity. We had what I would consider to be, and what Andrew mentioned, a very strong Q3. I will start with MSTR, our common equity, as amplified Bitcoin. We are built to outperform Bitcoin, and we did exactly that in the return to a bull market in Q3. Bitcoin increased 43% over the course of the quarter. MSTR increased 76%. In addition, we added 176,000 Bitcoin since the beginning of the year. So through a bear market cycle, we were able to significantly increase our Bitcoin, and that is more than 3x the second largest Bitcoin treasury company in the world, added all in the course of three quarters.
It has allowed us to be the number seven-ranked treasury in all of the S&P 500 peer set. As Andrew said, we raised $21 billion of capital year to date, another 21 number coincidentally, and we are the fourth largest issuer of capital in the U.S., again, in a Bitcoin bear market. We reduced our net leverage to 2.4%, down from 8.4% in Q2. Our downside is really now well-protected, where Bitcoin could fall 78% to $18,000 before we are 1x covered for our liabilities by our Bitcoin asset value. Our objective still stands. We are going to double Bitcoin per share over the course of the next seven years, and we think we are on our way to that. So I feel very strong about MSTR and where we are able to go on a go-forward basis.
As a reminder, digital equity, that is MSTR, is a combination of two things. One, amplified Bitcoin. We are going to increase Bitcoin per share. Two, digital credit. You have seen Strife, Stretch, Stream, Strike, Stride, and potential future innovation on top of that. For example, daily calendar day dividends. Our cap structure is really a volatility transformer. What do we do? We take digital capital Bitcoin, which has a vol of 36. We reduce that vol in our digital credit Stretch down to what is about 10% right now. We believe we can reduce that further down to potentially even 5% with a 12% dividend rate. All of that excess vol and the excess returns gets accreted to our digital equity, MSTR. That is basically the formula of the company and what we are able to do with Bitcoin, which is such a rare capital asset.
We are among the most liquid stocks relative to our size and amongst the most liquid stocks in the S&P 500 universe. You will see here, if we take a look at our options open interest as a percentage of our market cap, we are number two in the S&P 500 universe, and our daily traded volume as a percentage of market cap is also number two in the S&P 500 universe. What does that mean? That means there is a lot of interest in what we are, which is an amplified Bitcoin company, and there still is a lot of interest in Bitcoin, despite all of the attention that is growing towards AI and other related stocks.
If you take away the market cap, and do not look at us as a percentage of market cap, but just on total value, we are the number 17 options open interest company amongst the S&P 500 universe, and we are number 18 in terms of daily traded volume. That is a pretty big deal for a company like ours, which has grown from about $1 million to over $1 billion to over $70 billion in market cap in the course of six years. Last year, we were the number one equity issuer in the world. A year before, in 2024, we were the number two equity issuer in the world. This year to date, we are number 4, raising $21 billion in the equity capital markets. Three AI companies are ahead of us. AI and space, SpaceX. AI and search, Alphabet. AI and semiconductors Intel.
What does this tell you? It tells you that in any Bitcoin market, we are able to access the equity capital markets. This also tells you that there is still significant interest in Bitcoin and digital assets, and we see a bright future for the category overall. If you take a comparison to the 2023-2024 bull market, in that market, we outperformed Bitcoin significantly. That is the last real bull market we saw. During that two-year period from 2023 through 2024, Bitcoin returned 454%, MSTR returned 3.6x that, 1,897%. As we believe we are entering another Bitcoin bull market, we believe because we are amplified Bitcoin, we have the potential to similarly outperform Bitcoin during the next year to two years. What is the difference between the previous bull market in 2023 and 2024 and what we expect to see in 2026, 2027 and beyond is we are a very different shaped company.
In the last bull market, we had 132,500 Bitcoin, of which 37% were encumbered by Bitcoin-backed loans. Now we have 848,500 Bitcoin, nearly seven times what we had before, and 0% of that Bitcoin is encumbered by any of our debt or our preferreds. We added 18,000 Bitcoin in the last bull market. We have since added about 200,000 Bitcoin in this market. The Bitcoin floor in the previous market was 18,000. This time around is 17,000. Our BTC Rating was 0.9x, which actually meant we had less than 1x coverage on our liabilities. This time we have 4.6x coverage on our liabilities. Our net leverage bottomed out at 110% in the past market, this time around 2.4%. The USD duration that we had was zero. We did not have any US dollars on our balance sheet, and this time around it is 3.4 years.
Compared to the previous bear market to this bear market, we have strengthened the company significantly over the course of the last year. What it means as we exit the bear market into a bull market, we have a stronger balance sheet, and we think that creates even more opportunity for amplification and more opportunity for growth for our common equity over the course of the next couple year bull run that we expect to see. Our Bitcoin reserve, as I mentioned, was 132,000, now it is 848,000. $2.2 billion versus nearly $70 billion. $0 in US assets versus $5.1 billion now. No digital credit versus $13.3 billion now, and a net leverage of 108% versus 24%. What have we been doing for the last year?
We have been building a fortress balance sheet so that as we enter a bull cycle, we think we can outperform the last bull cycle that we went through. Since the Bitcoin all-time high, Bitcoin has fallen 35%, while our holdings of Bitcoin rose 33%. As Bitcoin price went down from $124,000 to $81,200, we have taken that opportunity to buy Bitcoin at a less expensive price and grow our Bitcoin holdings 33% to 849,000. Why do we think that there is an opportunity for MSTR to grow? Not just because we believe that Bitcoin price is going to grow, but we think MSTR is the combination of two things, right? One is the net Bitcoin that we have on our balance sheet, and two is the BTC $ Gain multiplied by whatever multiple you might attribute to that, which is really the functioning of our digital credit business.
We can grow Bitcoin per share and we can grow MSTR through two levers, essentially. One is through increase of Bitcoin price amplified to our common equity and increase of our digital credit business, which increases the Bitcoin gain, which can be ascribed a multiple. We think both of those components will start to take effect over the course of the next couple of years. What else happens during a bull market? What else happens during a bull market is we see mNAV start to expand, right? The 2021 bull market saw mNAV, median daily mNAV at 2.28, 2023, 2.57. 2024, 2.60. We currently sit at 1.15, but we see the potential for that to also grow over the course of the bull cycle. As I mentioned before, ultimately, what is the goal?
The goal is to double Bitcoin per share in seven years through the use of digital credit. How does that work? It is important to emphasize the interplay between digital credit and digital equity. If we can sell digital credit by selling Stretch at $100 into the market, that generates amplification to the company. It means that we are able to buy Bitcoin and pay 12% on that digital credit and accrue all the benefits of a greater than 12% gain, which generates amplification. The amplification increases Bitcoin per share, and the increase in Bitcoin per share allows the common equity to outperform Bitcoin over time. What are the levers? Levers are a lower cost of credit, which we look at very closely. The levers are higher digital credit sales, which we think we will be able to turn on again soon. Third lever is a higher mNAV.
Let us talk about digital credit. I talked about MSTR, digital equity. Now let us talk about digital credit and our five instruments that we have. First, the ecosystem is scaling really fast. We are really still only 22 months into digital credit. We have six issuers, not just ourselves, in a $16 billion market. Stretch is returning to health. It is trading between $99 and $100 per our commitment. Today's Stretch closed at $99.99. We strengthened our USD coverage. We have heard from our shareholders of our digital credit that that is important. Grew the digital USD assets from $2.5 billion to double to $5 billion. We are supporting our digital credit security Stretch. We repurchased $2 billion to Stretch, and we have $957 million capacity remaining.
Yesterday, daily dividends were approved for Stretch, which takes effect November 1st, and Strife, Strike, and Stride, which take effect January 1st. We are excited about that innovation. We are continuing to improve our credit profile, which I will talk through in a little bit. How do you think about digital credit? One thing to think about is digital credit is really a combination, an alloy of Bitcoin and USD. So much like when you take iron and you combine it with chromium, we create an alloy stainless steel, which is stronger, which is lighter, which is better than the combination of the two. Bitcoin, with 46 years of coverage, and dollars with 3.4 years of coverage, creates a 60/40% alloy called digital credit. That is what digital credit is.
It is ultimately a better version for certain shareholders of Bitcoin and of USD, and the sum is stronger than the parts. This market, as I mentioned, scaled to $16 billion in 20 months, and it is still fairly nascent and early. It is a brand-new product, never seen before in the history of capital markets, and we are pretty excited to see others come into the market. I had mentioned our five IPOs that we did last year, and Strife has since IPO'd SATA and recently SATS, two additional great products. Metaplanet has announced that they plan to issue digital credit. BMNP, which is an Ethereum-based digital credit instrument, was launched earlier this year. CHAD, which is a Solana-based digital credit instrument, was also launched earlier this year. MORE was launched, and we will see other products start to launch and layer two products start to build on top of this.
It is early, but it is very promising to see the digital credit ecosystem start to build out. Why is digital credit attractive? Well, if you look at the market today, there's been a lot of talk about AI private credit. The yields aren't bad at 10%, but they are opaque instruments, and they're not nearly comparable in terms of the yields that you can get on a tax equivalent basis with other forms of digital credit like the ones we've issued. Of course, worse than private credit are junk bonds, bank preferreds, investment grade, mortgage backed, et cetera, other instruments in terms of lower yields and different risk return profiles. As tax rates start to go up, both at the municipal level and the state level, you'll start to see that digital credit becomes even more attractive because it is a return of capital instrument.
What does that mean? The return of capital means that the taxes on the dividends are tax deferred. So rather than paying taxes, it lowers the cost basis as long as you don't sell the underlying instrument. So you can have a tax deferred status for as long as 10 years. That compares to qualified dividends, which might pay a 20%-35% tax. So $100 of dividends to Stretch and digital credit stays at $100. $100 of dividends on a qualified dividend instrument becomes $65-$80. $100 of interest and earnings on a taxable interest instrument like a money market becomes half of that when taxes are taken out. So this is one of the reasons that we think digital credit is a superior instrument.
We spent a lot of time thinking about after the downturn of Q2 to Stretch and some of our digital credit instruments on how to improve our digital credit. We put a capital framework in place, and we spoke about that at length on our previous earnings call. We built up a USD reserve that is a minimum of one year of dividends and interest, and now is three years of dividends and interest. We said that we would monetize Bitcoin for the purposes of funding the USD reserve, servicing our debt and interest obligations, and repurchasing securities. We sold a little bit of Bitcoin as a result of that, but a fraction of the Bitcoin we hold. We began a digital credit repurchase program, and we spent about $2 billion buying back Stretch, and we have a $957 million remaining authorized.
We put in an MSTR repurchase program of $1 billion, of which we have used none of it so far. We said we're going to keep the Stretch dividend right around 12%. We're not really going to increase it because we don't think that it will drive more demand for the product in a material way, and we don't think it's best for our common shareholders to increase the dividend obligations associated with Stretch. The sixth pillar that we added over the course of the last quarter is we added USD cash, and we added 242, which is currently at about $242 million. So what's the point of the USD cash? I'll start with the point of the USD reserve. It is designed to support the preferred dividends and debt interest. In fact, it is reserved and set aside explicitly for the purpose of paying dividends and interest.
The U.S. dollar cash balance gives us a lot more flexibility. It gives us flexible liquidity so we can buy Bitcoin, we can buy back instruments like Stretch, which we've been using it for, and other general treasury purposes. It is truly thought of like a cash balance that we can use for general corporate purposes to improve our Bitcoin business and ultimately to improve our digital credit, which ultimately improves our digital equity, MSTR. USD duration, this is the amount of USD that we have to cover our interest and dividend obligations, rose nearly 7x from our May lows. We had about half a year of USD duration previously. Now we have three and a half years of USD duration, and we think that is quite important.
USD strength is a new metric that we put in place. USD strength is the USD duration as a percentage of the blended Macaulay duration of our perpetual preferred instruments and our convertible instruments. What you see there is the USD strength gives basically an estimate of how much USD we have to pay dividends over the Macaulay duration of our instruments, and that has increased from 6% to 40%. We think these are both very strong metrics, and it shows the strength of our credit and the investment attractiveness of our credit. What else have we done? We have paid dividends, 40 dividends over the last two years. We intend to continue to pay all of our dividends across all of our instruments. We think it is important to do so to drive confidence in the digital credit instruments, which ultimately drives confidence in digital equity and MSTR.
We introduced some of these metrics last quarter. I want to re-emphasize these metrics because they are quite important ones, and they are good ones to think about how does digital credit and digital equity interplay, and how does Bitcoin ARR impact it. I will first start with the hurdle ARR, 10.6%. You might say, why is it not 12%, the same as the Stretch dividend rate? The hurdle ARR blends all of our instruments together, and as long as we see Bitcoin go up more than 10.6%, what that means that all of the accretion above the 10.6% goes to our equity. That is what we saw happen in Q3, where Bitcoin went up significantly and the equity saw the accretion above and beyond the hurdle ARR. That is one of the reasons we are able to produce amplified Bitcoin through our common equity.
The second ARR is the breakeven ARR. This says that as long as we see 2.2% increase in Bitcoin price on an annual basis, we will be able to satisfy our dividend and interest obligations if we were to want to, just by selling the Bitcoin that we accrete, the Bitcoin value we accrete, the 2.2%. That means into eternity, we will be able to continue to pay dividends and interest, which means that the digital credit works, but it may mean that the equity could underperform Bitcoin because we are not over our hurdle ARR. The last ARR is our floor ARR, 17.4%. If we see Bitcoin going down at 17.4% a year, what that will mean is the ability to cover our credit and our debt goes down to 1x.
At that point, the credit will get stressed below 17.4% ARR, and it means we may want to consider other different structures for the business. How do we think about these 2.2% breakeven ARR, 10.6% hurdle ARR, negative 17.4% Bitcoin floor ARR? If we look historically and we look at every four-year window back to 2015, Bitcoin has experienced a rolling four-year ARR on average of 42.7%, which is pretty incredible, the returns of Bitcoin over the last 10 years. More importantly, Bitcoin has beaten the 2.2% breakeven ARR in every single four-year window during that period. That breakeven ARR, our ability to pay our interest and dividends through Bitcoin increases, historically has occurred every single day in that four-year window.
We put another metric in here, which is the expansion of the U.S. monetary supply, M2 supply, which has been 1.9% on a four-year annualized growth basis. It is interesting to see how Bitcoin four-year ARR has moved roughly with that M2 monetary supply, as you might expect. We have two pages on our website that I thought would be useful to go through. If you ever go to strategy.com and go to the credit page, you can see these two analyses. These are pretty important analyses because what I would state is early on in the development of digital credit, people have a hard time understanding what is the risk, what are the credit spreads, and how do these ARRs come into play?
Let me explain the first page on our Credit tab at our website, which really goes through the credit analysis of our different instruments, our convertible bonds and our preferred stock. To analyze the credit, there are a couple assumptions that we make, and you can change these assumptions on the page. First, we assume the current Bitcoin price, right around $81,200 as of the end of last Friday. The U.S. dollar assets we have and then you enter two additional things, which is the Bitcoin volatility and the Bitcoin ARR. Here we decided to be conservative and put 10% in. Recently, JP Morgan released a study that ascribed a 10% Bitcoin ARR, so we thought that would be a reasonable input point and 40% Bitcoin volatility is what we have seen historically over the course of the last four years.
When we enter those things in and we run the analysis, what are we looking for? First thing is we look at what is the BTC Rating, right? What is the coverage that we have over the existing notional value of our preferred stock and our debt? If you go down to the most junior instrument, Stride, it means we have 4.6x coverage of Bitcoin over our preferreds and our debt, right? What is the risk that BTC Rating goes to 1? What is the risk that we will only have Bitcoin, right, to cover 1x all of these instruments? The risk that occurs at the end of the Macaulay duration for our most junior instrument is 6%.
If you want to play around the model and put a 20% Bitcoin ARR in there, you will see it is quite sensitive to that, and that actually takes the risk, the BTC risk of an instrument like Stride down to roughly 1.5%. With that risk, we can impute then a credit spread for each of these instruments. You will see the most junior instrument, Stride, has a credit spread of 86, Stretch has 54 basis points, and all of these cases, they are investment grade instruments with that level of BTC credit. The last thing we provide here is the BTC Floor. This one makes probably more common sense. We are at $17,662. That basically means that our Bitcoin stack will be valued at equal to our cumulative notional of all of our debt minus our USD assets and our pref's.
The big picture here is if you look at these instruments on a Bitcoin risk and credit basis, they are very low risk instruments. Then we have another page that says, well, how do you equate this to a price? What is potentially a reasonable modeled price or a derived price for these instruments? You will very quickly understand that if you take a look at the effective yield of these instruments, you look at something like Stretch, which has a 12% effective yield, Stride, which has a 14.35% effective yield. You take out the risk-free yield, you will see a market spread for these instruments that is much greater than the BTC credit spread that we were able to impute. If you were to take that differential, you might be able to derive a much higher price for these instruments.
What is the reason for showing this model? The reason for showing this model is, one, Bitcoin risk is not well understood and not well modeled today. We thought it would be good to provide a transparent way to look at this. Two, probably more importantly is we are early in the world of digital credit. Early in digital credit, we are a couple years into the products. It will probably take another year or two years for the market to understand, but we think there is a lot of opportunity in digital credit. If you just take a step back, Stretch is a 12% now daily dividend instrument, which is 4x to 5x collateral covered. We think it is a great option for folks out there. It has shown the ability to go through a Bitcoin bear cycle. We are fairly bullish on this market going forward.
Let me deep dive into Stretch and talk a little bit more about that. Highlights of Stretch as of October 2026. I mentioned a 12.1% effective yield, $160 million of trading liquidity. It is still the most traded preferred in the entire global capital markets by a lot. The volatility has started to come down to 10%. I believe we can get it below 10%, potentially approaching and below 5%. I mentioned the USD strength. Even after buying back $2 billion of Stretch, it is still $8.4 billion of notional. Very large, liquid, perpetual preferred instrument. The $8.4 billion of notional is backed by $5.1 billion of USD assets, $69 billion Bitcoin reserve, 46 years of dividend and interest payments between our USD assets and our Bitcoin reserve. Look, we recognize that Stretch had a pretty significant dislocation at the end of June.
The price went down to about $75. What I would say is the company is committed to taking actions, and we took actions to get it back within its target range. Not only did we get it back within its target range, we got it back to nearly par, $99.99, and we are committed to continuing to drive the instrument to trade at a range that we think is equivalent to what we think the product is valued at. What do we do? We introduce a new capital framework. We raise the dividend rate to 12%. We went to semi-monthly dividend payments now to daily dividend payments. We increased the USD assets, and we started buying some Stretch back. Interestingly, we started to understand a little bit more the investor base behind Stretch.
In the past, we have talked about 80% retail, 20% institutional ownership as of 3/17/2026, but what we realized that part of this retail looks a lot more like an institutional long-time holder than a retail, potentially, fast money investor. High net worth individuals, meaning folks with over $1 million in Stretch, represent 24% of the total Stretch investment base. What we have seen happen over the course of the last six months, institutional increase from 21% to 23%, nearly doubled their holdings. Probably more interesting is the high net worth individuals increase from 24% to 29%, and more than doubling their holdings. It is important for us to look at that, and it is important for us to understand that market because we think that is where potential growth is and very solid growth is.
Speaking of institutional holders, we are now the largest holding and the largest preferred ETF in the world by BlackRock, where we represent 3.49% of PFF. If we look at VanEck's, the sixth largest preferred index in the world or ETF in the world, we are also the largest there at 7.58% of the weight of the total index. Mike will talk more about this. People are building on top of Stretch. The ecosystem are not just owners of Stretch, it is not just ETFs, but it is an entire ecosystem of companies in the DeFi space, stablecoins, in the tokenization space, funds and ETPs, cash and yield accounts and corporate treasuries who are building on top of Stretch. This is our market, right?
The market obviously includes retail, but high net worth individuals, institutions like this are going to build products on top of Stretch and will cause it to grow from $8.5 billion to tens of billions, if not hundreds of billions over time. That is our objective. By growing Stretch, we will be able to grow MSTR and the virtuous cycle continues. As Andrew said, thank you to all of the folks who voted positively to move Stretch to daily dividends. The calendar day accrual here is a pretty big deal, right? People will start to realize the benefits as digital credit and digital transformation of capital markets occurs. We think that is going to start happening this year, right? Bitcoin already trades 24/7. We see equities moving in that direction. You are going to start seeing the Nasdaq move to seven-day trading towards the end of this year.
Tokenization is going to accelerate that even faster, especially in the U.S. with innovation exemptions that have been put forth by the SEC. We expect that market to grow very fast, too. What are you going to build on top of? What are your tokenized securities? Some of them may partner with or build on top of products like Stretch. Last thing I will leave it with before I hand it over to Michael is Strategy World 2027 is going to be back in Orlando next year, March 29-April 1, and I invite everybody to join us there. We are going to have an awesome time. We will run our Strategy Software conference alongside our Bitcoin for Corporations conference, alongside the True North conference, and it will be a great time. We will speak to you before then, at our 2026 Q4 earnings call.
Go ahead and register, and I hope to see you all in person. With that, I will hand it over to Michael Saylor.
Thank you, Phong. I want to thank all of our shareholders for being with us today. I am going to say a few words about Bitcoin, and digital capital and the way the ecosystem is evolving. We feel like we are entering a bull market. We bounced off the 200-week moving average. Bitcoin's dominance is growing. Institutional demand is back. The banks are embracing Bitcoin. We feel like digital credit and banking credit could absorb all the new supply. Strategy is leading on-chain. We are the most tokenized company in the digital assets ecosystem. This chart tells the story. Bitcoin has traded above a 21% premium for 78% of its history. We look at the 200-week moving average as the base of support. We have gone through about a one-year bear market.
We would think that we should see two or three years of a bull market at this point. We are only about less than 24 months, 18 months or so from the next halving. The halving will be a big deal, but there are a lot of other factors that are driving this. One thing that is very auspicious for Bitcoin is that Bitcoin market cap dominance is growing consistently through this cycle. It is about 67% of the market cap of all the crypto capital assets in the world. Bitcoin is two-thirds, everything else is the last third. It is pretty clear that Bitcoin is the digital capital network, the dominant digital capital network in the world. It will not be displaced. That is an important thing we can build upon. The structural catalyst for Bitcoin adoption, fiscal debasement.
The money supply is going to expand bank adoption digital credit, capital flows from institutions, tokenization, the AI disruption, which ultimately is going to drive capital into Bitcoin. As I mentioned, the Bitcoin halving coming up in 2028. Here you can see the capital flows and capital return to Bitcoin ETFs in Q3 to the tune of about $6.3 billion of inflows. We thought that was very auspicious. This chart structurally tells a story, and the story it tells is that the government is running deficit financing, and that being the case, the money supply is going to have to expand sometime in the coming few years. There is no reasonable opportunity to do anything other than monetize the debt. So we have cheaper sovereign debt that is going to be refinanced at a higher interest rate.
Either the interest rates have to come down or the balance sheet of the Fed has to expand. We do not know when this will happen or how it will happen, but this chart illustrates that it is going to need to happen. In the aftermath of the stall of the CLARITY bill in D.C., we got favorable regulations, favorable guidance coming out of Treasury, the SEC, and the CFTC. The Treasury guidance was very positive for digital currency. The SEC guidance was very positive for digital securities. The CFTC guidance was very positive for digital derivatives and digital commodities and digital exchanges. So this is all very digital assets positive news, and it has all happened just this quarter. We track banking adoption very closely.
We look at all the major banks and the degree to which they custody crypto assets, the degree to which they extend credit, whether or not they deal with Bitcoin derivatives or wrapped Bitcoin or the actual native Bitcoin, and whether they underwrite it. Also their stance on it. The stance of the banks has just turned positive and has been consistently getting better. If you look at this chart, we can see we are at a 9% banking adoption December 2023. We were 24% in December of 2025. We are now at 34%. We will continue to track this, but the banks have all the money, and this is a monetary revolution, and the most important thing for Bitcoin's success is that it be legitimized as a capital asset by the financial institutions of the world and that we create credit on top of it.
If we take a look at the major banks, we can see very positive moves by Morgan Stanley, Citigroup, Deutsche Bank, Standard Chartered, Banco Santander. Lots of broader digital assets momentum across the board as it relates to stablecoins, tokenized securities, and the like. This has the effect of de-risking the asset class, accelerating institutional adoption of the asset class, sending a signal to conservative and traditional investors that it is okay to allocate to the asset class and all of those things are just very positive for Bitcoin. So how much capital do we need in order to drive the Bitcoin price? Each week, there is about $256 million of natural Bitcoin produced by Bitcoin miners available for sale. It is 450 Bitcoin a day. It works out to about $37 million a day. If you have $37 million, you can buy it all.
After the halving coming around April of 2028, that $37 million a day of supply will become $18 million of supply. That means that right now, $13 billion a year buys all the Bitcoin produced. In a matter of less than two years, $6.7 billion would buy all the Bitcoin produced. If you imagine the impact on a commodity price, if you knew that the production of oil was going to be cut in half, or the production of gold was going to be cut in half, or soybeans or natural gas or anything, that would create a price shock. If you look at the amount of Bitcoin that is produced and you consider that number, $260 million a week, then you consider that U.S. banks are creating $17 billion of credit in the same time period. The banks are creating incredible amounts of credit.
Largely, this asset class has been unbanked for its history, and you can see that as it permeates the banking system, as the banks create credit, that is the equivalent of buying that much or taking that much Bitcoin out of production. Ultimately, the creation of bank credit is what drives the prices of equities up. Bank credit drives the prices of real estate up. Bank credit drives the prices of sports team franchises up and trophy assets like paintings. If the bank will lend against it, the prices will appreciate. When you have to pay cash, that depresses prices. The main cycle driver here is going to be the creation of bank credit. You can see the order of magnitude here, and it just does not take that much credit in order to absorb the entire natural supply.
The price has to move up in order to find a willing seller at a higher price. As I had said, tokenization is accelerating. Strategy is the most tokenized company on chain. We did not do anything for this to happen. This happened because we just happen to have securities that are ideal for tokenizing, right? Either amplified Bitcoin or digital credit. Both of those are correlated to Bitcoin, but you can trade them one way or the other against the Bitcoin 24/7/365. These are very valuable in the DeFi ecosystem and the digital asset system. Of course, one thing that DeFi does very well is it creates leverage, and it allows you to, say, lever something 2x or 3x or 4x under very flexible credit terms. The thing that you would want to lever would be a stable, highly liquid, low volatility, high-yielding instrument like digital credit.
Levering tokenized money markets at the cost of tokenized money markets does not really provide you much of an effective yield. But if something pays 8%, 9%, 10%, 11%, 12%, and you can borrow money at 4% and you start to put one, two, three, or four turns on it, then you can create digital income. Digital credit is a building block for digital income. By using anywhere from 2x to 4x leverage and using stablecoins and the global marketplace, you can see how you could create a fund that pays 5%, 10%, 15%, or 20% in yen, euros, pounds, or dollars as you like. You can just program up and program it down. Clearly, tokenization is interesting, and the market is very innovative, and we expect to be participants in it. This gives you another snapshot, and explains why tokenization is so powerful.
When you tokenize a security, it starts to trade 24/7/365. It also starts to trade globally. It is trading in Singapore or Hong Kong or Asia or Africa or South America. It also becomes programmable, so you can tranche it, slice it, amplify it, de-amplify it. The settlement goes from T+1 to nearly instantaneous. You can apply your artificial intelligence, your agentic finance to it. Agents want to do 1,000 things on the weekend, whereas your bank doesn't want to do anything on the weekend. Generally, high-speed trading in a TradFi world is moving money around once or twice a week. Of course, in the tokenized world, that might be once or twice an hour, and who knows? It might become faster than that. It is also possible to compose very interesting different products. So product innovation accelerates.
Tranching risk, creating yield, converting currency, hedging, plugging into perpetuals, all of these things are interesting. In a lot of traditional finance markets, you can't innovate at all. It is just literally not allowed to create many of these financial products. In other cases, it would take six months to three years to get approval to issue the product. So TradFi markets are crippled and conventional and slow and inefficient. They are also beset with all sorts of capital controls that slow down the motion of money. In the tokenized markets, to say this stuff happens 10x as fast is probably an understatement. Innovation can happen 100x to 1,000x as fast, and the money can move 1,000x, orders of magnitude quicker. Of course, what does this mean? It means the tokenized economy is delivering better financial products.
Who in Japan is getting an offer of 15% yield in yen? Nobody, right? You can deliver better financial products with different characteristics, orders of magnitude quicker, and you can make them easier to deliver. So we actually think that the nexus of innovation is going to be in the tokenized economy, and we think a lot about how do we optimize our securities to be ideal for tokenizing. One obvious thing is you make it pay a daily dividend because people can actually take action every day of the year, including holidays in the tokenized economy. They can't in the TradFi economy. Why does on-chain capital gravitate toward us? Well, stablecoins offer 0% yield. STRC has a par value of $100. It is targeted to be stable versus the dollar, and it is 12% dividend.
Of course, Bitcoin holders are seeking upside, but tokenized MSTRs amplified Bitcoin. A lot of people ask about AI. Anyone that has used it knows that it is disruptive and transformational to just about everything in the world. It is eroding moats. So AI will erode moats. What moats? Well, clearly, it writes software faster, it delivers services better, it creates media. It is going to provide legal consultation, education services. It transforms services, it transforms operation, it transforms the products themselves. It makes the products better, more intelligent. It changes the nexus where you deliver products. Lots of industries are affected. Some are extremely affected. On the other hand, what is it that the robots and the bots can't create? They are not very good at creating land. They are not very good at creating an acre in Palm Beach. They are not very good at creating commodities, especially scarce commodities.
And of course, the scarcest of all commodities is Bitcoin. Bitcoin is the greatest of commodities, and it is the great and the only digital scarcity. As the market evolves and absorbs AI, what you can expect is lots of companies are going to get dematerialized and demonetized and degraded by AI. Lots of products and services will be transformed. Many will go away. There will be magical products that will emerge. Self-driving cars, intelligent robots. You'll see someone will probably figure out how to provide medical, legal, accounting, financial advice to 1 billion people for a little bit more than the cost of the compute. Lots of things will transform. Lots of wealth will be created, but that wealth has to flow somewhere. It's going to flow into trophy assets, trophy real estate, products that you can't manufacture with a robot or a bot.
And of course, if I do want to transfer and preserve capital, move it across time and space, then the best way to do it is with digital capital, and that's what Bitcoin is. So we see Bitcoin as the winner. We see lots of chaos and disruption everywhere else in the economy. But ultimately, the world will be wealthier. There will be explosion in productivity. And the quality of living of the consumer should increase over time. There'll just be massive disruption in careers, products, services, corporations as we get there. This chart really shows a very important idea. If you're buying semiconductors that provide intelligence, they're 650x cheaper this year than they were three years ago. So semiconductors are a depreciating asset.
We learned this in the Bitcoin mining business, where it turned out to be a much better idea to buy $1 billion of Bitcoin than $1 billion of Bitcoin mining rigs. And that's because there's a massive, very rapid depreciation cycle on hardware to provide any particular service, whether it's security or intelligence. So digital intelligence is going to increase abundance, but it's not going to increase the amount of Bitcoin. Bitcoin is scarce. Lots of other things. Intelligence is not going to be scarce. Anything that you can create with intelligence is not going to be scarce. It's going to be quite abundant. And so it makes sense to capitalize a company on Bitcoin, the appreciating asset, not the Bitcoin mining rig, the depreciated asset. It makes sense to capitalize on something scarce and not something which is depreciating.
And so I think that the market will start to realize that. This is why, for example, digital credit backed by Bitcoin is a much better idea than private credit backed by high-performance compute data centers. Because you can see the hardware in the data center is depreciating. It's a very competitive market. It's going to continue to be competitive. And on the other hand, Bitcoin is going to become less competitive. There's only 900,000 Bitcoin left to come in the next 100 years. And so even as we exponentially increase the availability of intelligence and everything related to it, we're going to exponentially decrease the availability of digital capital and everything related to it. It's just going to appreciate. People ask about quantum computing. Are we ready for it? Are we ready for AI hacks and the like? The answer is the industry takes all these things very seriously.
We have a Bitcoin security consortium. It has the major holders and the major businesses providing economics products and services related to Bitcoin in it. Companies like Coinbase, like Anchorage, like Fidelity, like Galaxy, like Blockstream, like Block, like BlackRock, like ARK. We meet regularly, we support Bitcoin-related security research. We coordinate, and our focus is on making sure that we contribute to the stability and the security of the overall protocol. We will continue to do that. There have been dozens and dozens of things people have been concerned about with regard to the network over the past 15 years. Over the coming 10 or 15 years, I am sure there will be another few dozen things that will pop up. As they pop up, some of them are real, some of them are just FUD.
As they evolve and consensus forms that it makes sense to address them, then we are ready and able to do so. I think this is functioning in order to provide comfort to any Bitcoin investor that all the companies in this industry take security seriously, and we are engaged and coordinating. Future outlook. Bitcoin is 10 basis points of the world's capital assets. You can see its de minimis, a tenth of a percent. We expect over time that it will grow to be a percent, and then it may grow to be a few percent. You can see Bitcoin only needs to be a few percent of the world's assets to be extraordinarily successful.
The thing that is going to drive that growth is institutional adoption, the legitimization of the asset class, the creation of credit, the creation of equity and other instruments on top of Bitcoin, the applications of Bitcoin. We are headed toward a $100 trillion industry. That is where we think we will get to. $100 trillion when we get there may still only be single digits of global wealth. It will be a part of the capital structure of the world, but $100 trillion is a lot of money. What are the applications? Bitcoin is digital capital. Digital equity built on top of it is the second application. Digital credit instruments, as we have talked about, is a third application. Digital debt instruments based on Bitcoin, a fourth application. Digital currency, stable digital assets that are backed by Bitcoin will be a fifth application.
Digital money, something that is a stable currency equivalent that is paying you yield is another major application. Digital derivatives, perpetual futures, crypto derivatives, all flavors of options and perpetual contracts, another application. Then digital collateral, the capital that we embed into our robots, that we embed into our agents, that we embed into exchanges, that we use as financial infrastructure for all digital commerce. All of these are very compelling applications, and they all require digital capital and therefore Bitcoin in order to function effectively. I think it is reasonable to consider two other industries when we look at the way the Bitcoin industry will grow. If we start with oil. The oil industry had a first application, it was kerosene, and people used kerosene for light.
The original application of oil was reading lamps at night, and it provided a utilitarian value to the middle class such that they could afford light at night. Because before that, you are looking at whale oil, and whale oil was obscenely expensive compared to kerosene. Eventually, though, that light application was displaced by electricity. It was obsolesced, and the oil industry moved on to gasoline and then fuel oil and then heating oil, jet fuels. It fueled cars that did not exist when it was invented. It fueled planes that did not exist when we first discovered kerosene. Then we saw plastics and fertilizer and asphalt, and then we had lubricants and synthetic. Then we had fabrics, nylon and polyester and Lycra. Then it became a feedstock to pharmaceuticals and cosmetics and even food and coatings.
If you think about all the applications of oil, they are everywhere, all around us, and they all started with kerosene. The entire industry was a bunch of very innovative companies that figured out how to crack a barrel of oil into all of those different things and sell it to all of those different downstream manufacturers or service providers. Now we take electricity. It is a similar story. The first application was the electric light bulb. That was the killer app. But eventually, electricity drove motors and factories and refrigerators and air conditioners and radio and television and telephones and computers and internet. Data centers, electric vehicles, and of course, now it is AI, it thinks for us. When they started with the light bulb, nobody ever thought that eventually we would have Starlink and the AI to be thinking for us.
It is a very logical evolution. When we look at Bitcoin, the first application was peer-to-peer cash. Okay, how do I buy a pizza with 10,000 Bitcoin or buy two pizzas with 10,000 Bitcoin? But it is a mistake to think that the industry stays mired in that one first use case. That would be like electricity just sticking with light bulbs and oil sticking with kerosene. What we see evolving is digital capital, digital equity, digital credit, digital debt, digital currency, digital money. That creates digital income. You want 20% in JPY, EUR, GBP, USD, pick your currency. Digital derivatives, a 10x perpetual. Digital collateral. How do I actually put this collateral into my prediction market exchange, into my commodities exchange? It is an ideal collateral to fuel every financial application in the world. Now, digital identity.
You can use Bitcoin to create digital identity with public-private key pairs. Digital authentication follows next, and then digital commerce. Bitcoin is the basis of a whole set of digital applications. Great ideas outgrow their first use case. We will not be a $100 trillion industry based upon swapping Bitcoin for pizza. We will become a $100 trillion industry based upon hundreds or thousands of products created by thousands of companies, all to solve a different problem in the world of digital finance and digital commerce. We are very enthusiastic to be part of that, but we expect many other companies to follow in our footsteps. That takes us to Bitcoin treasury companies. There are four issuers of digital credit right now. They have issued 13 securities that are all based on Bitcoin.
Those BTC treasury companies, like Strife, like Metaplanet, like Smarter Web, those treasury companies have acquired 220,000 Bitcoin this year. That works out to 165% of all the Bitcoin mined this year. The BTC treasury companies are buying 1.6 Bitcoin for every Bitcoin created by a Bitcoin miner. You see a supply shock forming. It is right here in front of our eyes. As the BTC treasury industry grows, their demand for Bitcoin grows. That drives up the price of the Bitcoin, driving up the value of their reserves, improving their credit, improving their equity, allowing them to raise more capital, buying more Bitcoin, growing the industry, allowing them to create new innovative products like SATA, like SATS, like MORE, like Stretch, paying daily. There will be a continual set of new products. Those products will serve new investor bases. They will broaden the investor base.
That attracts liquidity, that legitimizes the industry, that will legitimize digital credit, that will legitimize digital equity, that will legitimize digital capital. We are not competitors. We are cooperators. We are all cooperating in a virtuous cycle, in a virtuous relationship in order to strengthen digital capital, digital credit, digital equity, and every other digital product or service that is backed by Bitcoin. I laid out a dozen. There will be hundreds of thousands. We are very early on in this industry's development. You can see if you look at this graph of issuers, multiple issuers just make the category more investable. There are a lot of investors, they can only have up to 5% exposure in one issue, or 2%, or 1%. If there are three issuers, they will have 15% exposure, but if there is one issuer, they will have 5% exposure.
We need multiple companies in order to diversify the risk, in order to allow all of the capital investors to comply with their mandates and manage risk per their risk models. Issuers are critical to growing the industry, but also issuers create innovations. We are not in a position to create a digital credit instrument in pounds, but Smarter Web is. We were not in a position to create a daily dividend, but Strife was. New issuers will be able to do different things. Metaplanet is creating new innovative instruments for the Japanese market. We are not in a position to do that.
All of us are working together in order to grow the global market, and as securities begin to get tokenized, that will make it easier for all of the global players to participate in other markets and to innovate in a more rapid fashion. I see this as very auspicious for the space. We can expect that AI is going to continue to push the boundary. It is pushing the boundaries of mathematics. It is pushing the boundaries of physics. It will push the boundaries of finance. We have designed all of our major credit instruments using AI. AI is critical for investors to understand them. It is critical to the models for pricing them. It is critical to solving the product design, the securities, the legal issues, et cetera.
I think that the growth of AI is very auspicious to the growth of digital finance. We just see this as a big plus for the industry in general. At this point, we have instruments for every time horizon. What I would say is if you don't need your money for four years and you're an equity investor and you believe in digital credit or you want amplified Bitcoin exposure or you have to buy an equity instrument, you would buy digital equity like MSTR. If you don't need your money for four years and you want to invest in something without counterparty risk, you would buy digital capital. You'll buy the Bitcoin. If you're willing or you need to buy it in an exchange-traded wrapper, you'll buy an ETF like IBIT. That's fine.
There are many people that are credit investors, and if you're a credit investor and you have a long time horizon, like more than four years, maybe you want to put a piece of credit in a retirement portfolio or a trust, a family trust, and you want to hold it for 30 years. Well, then we have instruments like Strife, Stream, Strike, Stride, SATS. All of these are long-duration perpetual credit instruments. They'll pay you a fixed dividend at par, whatever that dividend is, 10% or the like. You can lock in that yield for a decade or 20 years or 30 years. That makes total sense if you've got that time horizon and you don't need the money back in the next few months or few years.
You will probably absorb a bit more volatility in order to get that duration, but it's like holding a 20 or 30-year bond, a government bond, as opposed to holding a one-month or three-month T-bill. Those perpetual instruments meet a need in the market. If you have money to invest for four months to four years, we would say you're a treasury credit or a shorter duration digital credit investor, and there are instruments like STRC, what we offer, or SATA, what Strife offers, and that's for a shorter duration investor. If STRC falls off of par or breaks below par, then the company's going to use all of its capital and its best efforts to return it to par as soon as it can.
I don't think we would ever represent, for example, that we could do it in four days or four weeks because that might be pushing the edge of the envelope. But you can see that here in four months, we've shown that we can, and we think that it's a general reasonable expectation that the company will return STRC to par within four months if it were to lose or fall below par and out of our trading range. We would do that by buying it back. We would do it by adjusting our cash balances. We would do it by adjusting our capital structure, et cetera. Whatever we needed to do that we thought was rational at the time.
Now, if you need your money back in the next four months, maybe you have money and you want to invest it to get some yield, but you need it back in five days, you're a money market investor, and we would recommend that you put your money in a money market. Right now, money markets pay SOFR or something like that. We don't have a digital credit product that is for people that want to invest money for zero to four months, but partners are generating and innovating. In the digital asset space, people are creating digital money type instruments. Over time, I expect that Bitcoin treasury companies will create digital money type instruments that will meet this need. That's an opportunity for all of us that we're very enthusiastic about. What are we?
Well, we are emerging as the central bank of the crypto economy. At this point, we're the best capitalized public entity in the crypto space. We have about $74 billion of capital right now. That would put us as the 56th largest central bank in the world. We're moving up these rankings at a rapid rate. We will continue to grow, and our job is to bridge the TradFi market with the DeFi market, the BTC market with the fiat USD type market. We expect that we will bridge the gap between Bitcoin and stablecoins, between capital and credit, between TradFi and DeFi. We will work to strip volatility from Bitcoin for people that don't want vol, and we will amplify volatility for derivatives traders or equity investors that want more vol. We will extract yield, we will manage risk, and we will convert currencies, right?
Converting BTC into a USD instrument or a euro instrument or something similar. It's a very powerful business. We think that if you want to do this, you need a tower of capital, in this case, $74 billion. We think it's a very defensible moat. If someone wanted to invest $100 billion or $200 billion, or maybe even more than that in order to compete with us, they would have to buy that much Bitcoin. If someone went into the market and tried to buy $200 billion of Bitcoin right now, it's quite likely that our credit spreads would compress, demand for our credit would explode, our equity premiums would expand, demand for our equity would explode, the price of Bitcoin would appreciate, our reserves would appreciate, and our overall company would grow faster than they could buy Bitcoin. Probably much faster.
It's very difficult for anyone else to displace us in this position because we've established this large defensible Bitcoin holding. We intend to use those reserves, substantial BTC reserves and substantial USD reserves, in order to create the digital credit which bridges all the global markets, the global credit markets, all the currency markets with the crypto markets, with other forms of capital, and with the traditional finance markets. We think it's a great business opportunity. It needs to be done. You can already see based upon our success raising capital in the TradFi market and our success tokenizing our securities in the DeFi markets, that we're making great progress toward this ultimate vision. With that, we're ready for Q&A, and we look forward to answering your questions. Thank you for staying with us.
Thank you, Michael. I would like to welcome all our Q&A guests and invite them to come on video. We look forward to hearing your questions. We will go one at a time. I will call your names, and you can direct your questions to the management team. For the first question, I would like to invite Andrew Harte, Director and FinTech Analyst at BTIG.
Thanks for taking my question, and good work this quarter. Slide 26 frames the stronger balance sheet today compared to the previous bull market. Phong, you talked about the balance sheet enabling Strategy to take better advantage of a bull market with increased optionality. I would love to hear what exercising that optionality looks like. What are the key differences in how you plan to manage the business in the next bull market versus the prior ones? Thanks.
Well, I can start, and I am sure some others can join in. The big difference is, one, our Bitcoin balance is almost 7 x larger, is fully unencumbered. We have USD balance, and all of those things allow us to issue digital credit, which we were not able to do before. Before, we were relying on primarily leverage through convertible bonds. We have talked at length why we think that is inferior. One is there is just a limit to the size of the market of convertible notes. It is a less liquid market. It is over the counter, means retail cannot participate.
Amplifying the company through perpetual preferreds is far superior, and now we are able to do that on the back of nearly $70 billion of value of Bitcoin, which means that if we wanted to, we could raise $10 billion, $20 billion, $30 billion through perpetual preferreds, which if we pay 10%, 11% out at and Bitcoin goes up 30%, 40%, that creates amplification for the company and it grows the equity. That is the big difference is we are a much larger company and we have now a new strategy, which is digital credit. Mike mentioned, that is just issuing digital credit ourselves. Then there will be companies in the DeFi space and the TradFi space building products on top of digital credit. No one is building products on top of our convertible notes. Now we have DeFi, we have traditional finance companies that over time will issue stablecoins.
They will produce returns, putting digital credit behind it. I think the opportunity is pretty tremendous over the course of the next one, two, three years.
Yeah, the point I would make is you need a lot of capital in order to create a lot of credit.
We could create $10 billion, $20 billion, $30 billion of digital credit right now with our existing capital structure without raising any more equity capital and without Bitcoin appreciating. We have a lot of credit capacity on the balance sheet now, and of course, we can create different types of credit. Are you creating BTC 5-rated credit, BTC 2-rated credit? The amount of risk in the credit and the amount of volatility in the credit is important to various types of investors. One type of credit we are very interested in is digital money. How do you create zero volatility digital credit? Of course, you need a lot of capital to create zero volatility digital credit. You need a lot of capital to create a vol five.
We think that we are using our capital as a very powerful asset, and we are positioned for the next bull run. But the company's optionality is quite powerful now because we do not have to rely upon Bitcoin to do the heavy lifting or the equity to do the lifting. We could use our balance sheet to do the heavy lifting right now. That means we can meet a certain credit obligation or we can sell a certain type of credit to a credit investor, or we can create new forms of credit with different volatility and risk profiles and different liquidity profiles as well, that will also tap in and activate new markets. We are excited about that.
Andrew, next I would like to invite Khing Oei, founder and CEO of Treasury.
Guys, thanks for being on the call. I have two questions if I may. One about equity and one about credit. On the equity side, you sold more than $5 billion of equity this quarter through the ATM, and the majority of that went into raising the cash balance and into buying back STRC. It was clear you needed to stabilize the capital structure, which you have done. Now that is the case, I would love to get maybe some guidance or a ladder even about how you think about where the equity ATM is accretive. So where you would really switch it on again to buy Bitcoin. On the other hand, if the mNAV stays sort of where it is or lower, at which point it would make sense to actually sell STRC, assuming it goes back par again, to buy back actually MSTR itself.
On the credit side, if I may, clearly you have done a great job over the quarter stabilizing STRC, bringing it back very close to par, a cent below par. It actually surprised me a little bit why it has not been a bit stronger given the buybacks you have done, the cash you have raised. I was wondering from your conversations with credit investors, institutional investors, what is it that would make them really buy this in size? Is it the coupon? Is it the cash balance? Is it some structural features? What would make it happen and what would get this to $100 billion or a trillion-dollar kind of asset, right? Is there a key feature that will allow it to happen from where we are sitting now? Thank you.
I can start. You put like five questions in there, Khing, so I will try to get to all of them. The first question, what takes Stretch to stabilize at par and why did not it happen faster? First I will say is Stretch went from a $2.5 billion IPO to $10.5 billion in the course of about eight months. You might be able to argue that we overcharged it, right? We brought in some capital that was not the most healthy. So I think it overcharged, it dislocated from par, went down to $75. Money exited. Money looking for accretive principal growth entered, and we had to go through a cycling of the instrument. So it ended up taking from June to now about four months to do. I think we will be at par and stick at par pretty closely.
But I don't think four months is unreasonable in an instrument that grew that fast. That's one. Two, how do we want to buy Bitcoin? The primary way to acquire Bitcoin is by issuing digital credit, STRC, or other instruments that start to grow over time or other digital credit instruments. When we raise $1 billion or $2 billion a month on a Stretch, I think one thing we'll likely do this time is we'll put some of that into the U.S. dollar reserve and we'll use the remainder to buy Bitcoin. Then the idea would be to issue equity above 1x mNAV or greater to pay the dividends and interest on the digital credit. The primary way to buy Bitcoin is by issuing digital credit, put it into Bitcoin, pay a 12% dividend, and get the returns on Bitcoin of 30%, 40%.
Will we issue MSTR to buy Bitcoin? Perhaps, if the mNAV starts to expand aggressively and we see an opportunity. But the primary way to accrete Bitcoin to the company to create amplification and increase Bitcoin per share is going to be through digital credit.
Thank you.
Thank you, Khing. Next I'd like to invite Alex Thorn, Managing Director and Head of Research at Galaxy.
Thanks, CJ, and thank you Michael, Phong and Andrew for having me on here. I also wanted to ask about your digital credit instruments. STRC and STRF have traded back towards their face value, certainly to some extent with the help from your buybacks and your cash hoard, I think very prudent. STRD and STRK are still trading around 70. And in Europe, STRE is below 80 and it barely trades at all. What are your plans for these other prefs that aren't trading back to face value? And for the one in Europe, are you planning to push to get it uplisted to a major exchange?
We'd like them all to trade strong. The focus right now is getting Stretch back to par. I think we're close to that. By the way, once it gets to par, and maybe to add to my answer to Khing's question, I think that will create a lot of confidence in the instrument, when they see something that dislocated and came back to par within four months, and actually shows the resilience of the instrument on a go-forward basis. The other thing is I do think the calendar day daily dividends will help. We've been told by some large institutions that want to invest large pools of capital that are currently undeployed, where they might put it into a T-bill earning 400 basis points, and they can put it into something like this and earn 12%. I think all of those types of things will grow Stretch.
That's priority number one, get Stretch to par, grow Stretch so that we can buy Bitcoin, amplify the stock, and accrete the common. That's sort of priority one. I do think as that happens, the stock goes up and as Bitcoin starts to grow again, that the other instruments that you're talking about, Stride, Strike will start to grow. Stream will start to grow. Those are ones that are more sensitive to Bitcoin price. Stretch is less sensitive to Bitcoin price. We're not dismissing those products. We're focusing on Stretch, and then those other instruments will start to grow over time. And we have, when you think about our buyback capability, it's not just limited to Stretch. We could consider if the price stays dislocated on those, looking at those two. And then Stream, the Euro-listed one is a little bit of a challenge.
Because it's currently on an unregulated exchange in Europe, which means that it can't trade with retail. We need to find a way to improve and correct that product over time. We haven't forgotten about it, but the European regulatory environment, as many probably know in the capital markets, is not nearly as easy to work with as the U.S. regulatory environment.
I think that there's one other point worth making, Alex, which is all of those instruments dislocated when STRC dislocated, they all recovered to a pretty similar level. I think they were all up about 30%. The recovery of STRC actually was correlated or led, or it either dragged or it was comparable to the recovery of Strife, Stride, and Strike when it happened. They all benefited from what we're doing. Right now our focus is make sure that STRC trades well, but then to Phong's point, we think we're entering in a new regime. Once we get into a stable point of equilibrium and then we migrate them all to daily dividends, then I think that people will probably start to give all the other credit instruments a look or more of a look and we're optimistic about their future.
They do all represent optionality for us. Also they all represent a good tokenizing opportunity for us. As they get tokenized and as the market becomes more fluid, we think that they could appreciate in value.
Thank you, Phong. Thank you, Michael.
Thank you, Alex. Next, I'd like to invite Pete Christiansen, Director of Digital Assets and FinTech Services Research at Citi.
Thank you. Good evening. Great to be on the call again. Michael, question is as a business scales further, you are not just allocating capital into Bitcoin, but you are also increasingly creating new financial claims against Bitcoin. I am just curious, how do you think about the risk that the Strategy success accelerates the financialization of Bitcoin itself, introducing leverage, duration, counterparty exposure into an asset that historically has derived much of its appeal from having none of these characteristics? I am just curious your views there.
I think I read an analysis on institutional adoption of Bitcoin, and it was like 12.2% or 12% or something between the Bitcoin treasury companies and the ETF issuers. If you roll the clock back about five years, it was like 3% or 4%. So institutional adoption has moved from like 3% marched up to 12%, but that means 88% of this is still either retail or native crypto. I think it is de-risking the industry to go toward greater institutional adoption because that legitimizes the asset. It is a good thing for the asset that BlackRock holds some of it. Every time an institution becomes engaged, whether it is Morgan Stanley or Wells Fargo or Charles Schwab or anytime there is a company like ours, I think that de-risks the asset because those institutions are all regulated, compliant, public, audited. They represent hundreds of millions of beneficiaries, right?
Rippling through every institution in the world. The way I look at it is if 95% of the asset was retail, not in institutions, then you do not have a lot of strong institutional benefactors and patrons. Of course, it is the institutions that represent Bitcoin in Washington, D.C., and they represent it in Brussels. It is the institutions that actually solve the legal issues, the accounting issues. It is the institutions that finance the more difficult development. The institutions are financing all the security issues. It is the institutions that have access to the frontier models, and they can actually do cybersecurity checks with the frontier models, right? So, I think actually it is a good thing, right? For institutional growth to progress. I do not see it representing a risk at all. If anything, it is expanding the capital in the ecosystem. It is creating a constant bid.
By the way, it is damping vol. The volatility of the asset was about 80%-85% when we got into this industry in 2020. Institutional adoption was 4%. Today, the volatility is 40%, institutional adoption is 12%. It does not take a rocket scientist to figure out how do you damp volatility? Well, one way you damp volatility is there is an entire options market that formed on IBIT, like a $30 billion options market. So if you want to go and damp the volatility and sell the volatility and strip the upside and then strip the downside, then you need mature derivatives markets. The mature derivatives markets only exist. They exist because Coinbase is bringing the crypto derivatives market to the U.S. as an advocate. They bought Deribit.
They exist because BlackRock advocated for IBIT, and then all of the derivatives on top of IBIT only exist because of BlackRock, and they exist because MSTR created a very large regulated derivatives market in MSTR stocks and its equity. I think that the institutional actors, both the funds, really there's three. There's 100 funds that are very important actors. There's Bitcoin treasury companies, 100 of us, but especially a dozen are very active, that are important actors. And then there are all the digital exchanges, right? The more digital exchanges that if Schwab trades Bitcoin, that's good for Bitcoin. If Coinbase gets bigger, that's good for Bitcoin, right? What you want is lots of big, regulated public companies in every market, right? You want them in Japan, you want them in Europe.
You want banks, exchanges, brokers, corporations, and funds, all of them to be handling the asset. They all solve a different problem. They create legitimacy, they solve the compliance issue. I'm an investor, and I live in the U.K., and I have money in a retirement account, and the only way to buy Bitcoin is by buying Strategy stock in the year 2020, because that's literally the only legal, practical way to do it, right? So we're all creating bridges to Bitcoin in a very complicated world, where there's a lot of capital that's stranded and we're solving problems like the accounting problem. There's so many different issues that have to be solved, and no one company can do it all, but a retail investor normally struggles to solve these problems. I think the asset class is growing up, and it's a good thing.
What it means is the vol will fall, the capital and liquidity will increase. The price will go up. The size of the industry will go up. And the number of beneficiaries will expand, and the number of companies participate will expand, and the products and services will expand. And those are all good things. That's what you want. It's kind of like saying, "Well, in the electricity business, I'm really concerned, Mr. Edison, that other companies also want to create electric motors or use electricity." Or, "I'm really concerned, Mr. Rockefeller, that other people want to actually build petrochemical products that use oil. Doesn't that bother you? We only want retail people to have barrels of oil in their backyard." And of course, no industry is going to grow until you have thousands of companies that are doing very intricate things to add value to the base product.
The base product is Bitcoin, and it's like oil got financialized, electricity got financialized, and Bitcoin's getting financialized and it's not a bad thing. It's a good thing, right? And it'll turn out to be a great thing. I look forward to that.
Thanks so much. Very thoughtful.
Thank you, Pete. For the last question, I would like to invite Scott Melker, also known as The Wolf of All Streets.
Thank you. Thanks, CJ. Thank you, everybody. Michael, you made a very compelling case earlier for 24/7 global programmable instant settlement on MSTR, STRC via tokenization. But in your own slide that presented that, it basically said these tokens are issued by third parties and not by Strategy. There is also an irony, obviously, which is that effectively none of these products right now are even available to Americans. They are generally only available offshore, and they do not actually pay the cash dividend like STRC does. They generally rebase or reinvest in the underlying asset. To continue on today, it is being reported that Nasdaq is actually urging companies not to participate in tokenization.
With all that in mind, and knowing that we have a constant pendulum swing of a regulatory environment, do you have plans for Strategy to issue its own tokenized MSTR and preferreds on-chain open to U.S. investors with dividends paid on-chain? If so, what would allow you to do that, and when?
Well, it's an evolving industry, and I would say we're kind of year one or somewhere between year zero and year one, especially in the U.S. We want to do everything we possibly can to support the industry. We have been active participants in the offshore tokenization world, supporting companies like Apyx and Saturn and cheering them on and enthusiastically watching what's happening there. In the U.S., that's an evolving situation where the protocols are evolving, the platforms are evolving, the compliance rules are evolving. It's not clear to me that every issue's been settled, right? As you rightly perceive. Our view is there probably isn't a single path. There's not a single token standard. There are going to be ecosystems that build on BNB on Ethereum, on Solana, on various open chains like that.
There are going to be systems that probably evolve around more proprietary networks or closed networks, or compliant networks, and there'll be flavors of compliance that'll have more KYC and less flexibility, and there'll probably be some walled garden token systems where you can tokenize it, but you can't take custody of it, and you can't move it outside of the system. My view, of course, is that the promise of tokenization is creating a free market in credit, in custody, in collaboration, in composition. A completely free market. But you and I both know not everyone shares the same view of the benefits of a free market and where they draw the line on constraints. I think the short of it is you're going to have institutions like us, like BlackRock. Larry Fink's been a major advocate for tokenization. He's literally been giving speeches every year.
He's been on the forefront of this. There are going to be institutions like us and BlackRock, and we're going to be advocating for the most powerful progressive tokenization rules on a global basis, and especially in the U.S. I think that there's not going to be one particular platform or one particular approach. We're going to work with everybody as best we can, and then I think the market is going to pick a set of approaches it likes, but it will be a hybrid process where it'll be a dialogue or a dance between the regulators, and you'll see TradFi. There's a TradFi view, which is more conservative. There is a digital assets view, which is more progressive. There are going to be progressive regulators in certain jurisdictions, and there are going to be less progressive or regressive regulators in other jurisdictions.
We're going to be enthusiastically working to polish our securities or to structure our securities to make them the best products we can possibly create. I can't tell you what kind of digital assets initiatives we'll take now before we take them, but I think you can be sure that we're studying the entire market in every way, and we're asking the question: What do we need to do? What kind of securities do we need to create that are optimal to be tokenized? Can we change existing securities to make them better for being tokenized? How can we support digital exchanges and innovators? There's a whole industry of innovators. There are the people that are tranching risk, the people that are creating tokens, the people that are trading them. There are the exchanges, there are the custodians.
We're talking to all of them, and we're trying to figure out how we can best be constructive and supportive in a responsible fashion. If I knew the answer, I would give it to you. I think that as soon as we have concrete offerings for U.S. investors, you'll find out from us. Meanwhile, this is one of those things where you grind the AI really hard and you have to find what's the right legal solution, the right compliance solution, the right practical solution, and the right economic solution. Then you have to figure out how to do it without fragmenting liquidity or creating fragility or new types of risk, or layered risk, and that makes it complicated.
We're enthusiastic and we're optimistic, but I really think the elephant in the room here clearly is that the U.S. capital markets have not converged on a tokenizing standard and a set of norms yet. The market participants are all working their way through that. I would also say the next 12 months, I think we'll probably see a set of standards evolve and a framework and a structure. When it happens, it'll happen pretty quickly.
Thank you.
Thank you, Scott. That concludes the Q&A. I'd like to thank all the guests for the questions and all the attendees for joining in live. I believe we had over 50,000 people across various livestreams. I'll now turn the call over to Phong for any closing remarks.
Thank you, CJ. Thank you to the guests who joined us today with your thoughtful questions. Thank you, Andrew, for your service to the company over the last four and a half years. Thank you to everyone that joined us this evening for our Q3 earnings call. I look forward to seeing everybody again in about three months. Take care.