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[The Kobeissi Letter @KobeissiLetter]

BREAKING: US officials say Iran has struck two commercial vessels in the Strait of Hormuz.

[Collin Rugg @CollinRugg]

On July 4 2012 in San Diego, California, 7,000 fireworks accidentally went off all at the same time.

What was supposed to be a 17 min show, lasted just 30 seconds, thanks to a computer glitch

It is one of the greatest firework shows of all time

Happy 250th birthday, America 🇺🇸

[NikBTC @NiklasBTC]

@MrBeast 50 million !

[swissbtc🇨🇭 @swissBTCmaxi]

For me there are 4 people I listen to carefully in this #bitcoin environment, especially during a harsh bear market with so much noise around. They are:
1/ @DylanLeClair
2/ @_Checkmatey_
3/ @timevalueofbtc
4/ @thebtcpharaoh

Finding the right info and "anchors" to take decisions is key!
All the rest is either noise or entertainment 🍿

Thank you to those 4 for keeping the bearings clear! 🧭

[Massimo @Rainmaker1973]

This simple bed position creates spinal traction, stretches deep hip muscles, and reduces tension on the sciatic nerve.

[CooperBaggs 💰🍞 @edgaralandough]

🚨 BREAKING: Claude has a feature called Reading & Learning Mode. You can use it to learn anything faster than 99% of people. Here are 5 prompts to access it:

[TacticzHazel @TacticzH]

In the long term, there is a 100% correlation between corporate earnings growth and a stock's valuation.

If stock price follows EPS, and it should, here are 8 high quality companies that look like a great opportunity today.

1. $MSFT - Microsoft

[The Kobeissi Letter @KobeissiLetter]

BREAKING: Microsoft, $MSFT, announces price hikes for Xbox devices due to memory chip costs just hours after Apple hiked prices on MacBooks and iPads.

Among the price increases:

1. Xbox Series S 1TB increased +$150 to $599
2. Xbox Series X 1TB increased +$150 to $799
3. Xbox Series S 512GB increased +$100 to $499
4. Xbox Series X 1TB Digital increased +$150 to $749

AI-induced price hikes have begun.

[zerohedge @zerohedge]

And here's why: Hyperscalers (AMZN, GOOGL, META, MSFT, ORCL) vs Semis (NVDA, MU) free cash flow

[Meb Faber @MebFaber]

A few things I learned today:

1. Being born blind completely abolishes the risk of developing Schizophrenia.

2. If Paul Revere took his midnight ride this year, he could stop at 7 Dunkin locations.

3. Nigeria, with 240m people, generates less electricity than Wyoming, with 0.6m

4. Almost 40% of Stanford students report having a disability.

More:

https://t.co/PX52DZ5ht7

[The Long View @HayekAndKeynes]

It’s a buyers market in US housing

[Danny Knowles @_DannyKnowles]

Is Michael Saylor Trapped? | @AdamBLiv

We discuss:
- Why STRC is trading at $81
- If STRC can recover
- The risks to MSTR shareholders
- If Strategy will continue to sell Bitcoin

Watch it here: https://t.co/TKbwPTdPNw

[Lyn Alden @LynAldenContact]

@BoringBiz_ There are two steps to stand out, imo.

-You work for your boss. Make them look good.

-Proactively solve problems that others consider too small or too big. Just solve them. Fix problems your boss didn’t even know they had, but did, and explain the fix. Then do it again.

[Samson Mow @Excellion]

$STRC has a self-repairing mechanism that most people don’t really understand. 🛠️

Below par, Strategy stops issuing new shares via ATM. No new capital is raised at a discount, and no new perpetual dividend obligations are added to the balance sheet. This is the case at both $99.99 or $90.

The self-repairing mechanism then activates automatically - the farther below par, the more powerful it becomes.

Here’s how it works 👇

1⃣ Effective yield increases (higher % return on the same cash dividend). The 11.5% dividend is not paid on the market price of STRC. The dividend is paid on the par value of $100. Think of each unit of STRC as $100 but you can buy it for less sometimes, depending on market conditions. If you buy one share of STRC for $90, the effective yield is 12.78%.

2⃣ Pull-to-par capital gain incentives activate. Strong buy pressure emerges from investors who want the combination of elevated effective yield + capital gains as price moves back toward $100. The higher effective yield feeds the pull-to-par dynamic, which is further supported by the Bitcoin balance sheet continuing to strengthen. Buyers at a discount capture the recovery to par as capital gains.

The system self-corrects without anyone having to “defend” a peg (and again for the people in the back, there is no peg because it's not a stablecoin). STRC and similar instruments (such as SATA) rely on free-market incentives and long-term Bitcoin growth to restore equilibrium.

If liquidation events (like we saw last week) push STRC below par, it simply trades below par. STRC below par does not negatively affect the dividends; it only affects short-term capital that wants to exit immediately. If STRC required active defense, that would actually be a weakness. Structures that cannot bend under stress will break.

Now let's run some numbers to get an idea of the actual incentives for the market. As STRC is a perpetual, we'll go with a one-year time frame for recovery to par. And let's use the $90 IPO price.

Effective yield (what you actually earn in dividends relative to your $90 cost): 11.50/90 = 12.78%

Pull-to-par capital gain: (100-90)/90 = 11.11%

Total return on your $90 investment: (11.5 + 10)/90 = 23.89%

*Note this is a simple sum approximation. As dividends are paid semi-monthly throughout the year, the actual realized return is slightly higher if you factor in the timing of cash flows.

So this ~24% one-year total return profile (yield + cap gains) is exactly what makes buying below par attractive for total-return investors. It turns a temporary discount into a high single-year payoff (or shorter) while the self-repairing mechanism does its work.

To reiterate what I said previously, there's nothing for @saylor and @Strategy to do here. No need to raise the coupon, no need to increase the cash buffer, or anything else. They could do those things of course, but it’s not a necessity.

STRC is working perfectly as designed.

[Chaitanya Jain @CJ_Bitcoin]

We now have 32 years of dividend coverage through our $BTC Reserve and 10 months through our USD Reserve.

[Michael Saylor @saylor]

Strategy has increased its USD Reserve by $300 million to $1.4 billion and plans to continue replenishing it to support the credit quality of its Digital Credit securities. We also acquired 520 BTC for $35 million, increasing our $BTC Reserve to ₿847,363. $MSTR $STRC https://t.co/KeJ067fFWs

[The Wolf Of All Streets @scottmelker]

$STRC pays its dividend based on the $100 liquidation preference, not the market price.

If the dividend rate is 11.5%, that’s $11.50 annually per share.

Buy at $100 = 11.5% yield.
Buy at $90 = 12.8% yield.
Buy at $85 = 13.5% yield.

Same dividend. Lower purchase price. Higher yield.

That’s why STRC trading below par is attractive to income investors.

People seem… confused.

[Jesse Myers @Croesus_BTC]

This post was seen by ~1M people yesterday. A few more thoughts on the topic...

A. "Steady lads, deploying more capital"

This is the infamous meme that comes from the Terra/Luna implosion. Crypto people have scar tissue from the May 2022 implosion of this algorithmic stablecoin.

Terra was designed to maintain a $1 peg by using a BTC treasury (Luna) to bid if the price went below $1, and sell if it went above $1. This works great, except in a panic.

4 years ago, panic happened. People wanted out of Terra, so the Luna treasury was automatically drawn down to protect the peg.

But this depleted the system's resources and deteriorated its capacity to keep defending the peg, which stoked more fear and exacerbated the exit pressure. Eventually the BTC treasury was depleted, the defense system was exhausted, the peg broke and Terra went to zero.

People who lived through that are wary of STRC and other Digital Credit instruments.

But, STRC is the opposite fundamental design of this.

B. Architected systems vs. free markets

Terra/Luna was an architected system that actively used its treasury resources to defend a peg.

STRC relies on free-market price discovery to find price equilibrium, and does not promise to maintain a peg.

And that is at the heart of why Strategy will be fine, and STRC along with it.

Strategy will not expend resources to try to maintain anything. Instead, the free market will find equilibrium on its own.

C. How to kill STRC

The health of STRC depends on the health of Strategy's balance sheet, because that determines whether STRC holders continue to receive dividends.

STRC's market price can depeg and trade at a serious discount... but Strategy's balance sheet is completely unaffected.

To attack Terra/Luna, you just needed to create a confidence wobble that forced the system to expend BTC treasury resources to defend the price of Terra.

To attack STRC, you need to deplete Strategy's balance sheet. Since they're not actively expending it to defend anything, you would need to send Bitcoin's price to ~$0 and keep it there. Good luck!

D. How STRC heals itself

STRC trades down in this leverage wipeout to $82. Strategy does nothing; expends no resources.

Strategy keeps paying STRC dividends with its unaffected balance sheet strength.

Now, investors are getting ~14% effective yield w/ the potential for a ~20% capital gain. STRC is more attractive than it previously was!

This attracts more investors. Price is bid up.

Strategy will likely increase dividend rate on June 30 to 11.75% or 12%. This makes STRC more attractive still. Price is bid up.

STRC dividends keep being paid. Market realizes that Strategy is unimpacted, it was just a leverage wipeout. Confidence in STRC dividends returns. Price is bid up.

Back to $100 par.

It will take weeks or maybe months, but that is how the free market (and the variable rate dividend mechanic) will restore STRC to $100.

And that's why this is the opposite of Terra/Luna's design.

[Jesse Myers @Croesus_BTC]

STRC down to $82.6 today. Here's my read:

1. Strategy is fine. If everything stays as is, they can pay STRC dividends for 32 years. If BTC appreciates at ~2% CAGR, they can pay dividends indefinitely.

2. Why the sell-off? This appears to be a liquidation cascade.

Over the last 6 months, the narrative became that STRC volatility was reducing, and price began to spend all its time in $99-100 range.

This invites leverage. If you expect the price to always be north of $95, you can take on 20x leverage with your portfolio to buy more STRC and dramatically increase the yield on your portfolio.

This works great, until it doesn't.

STRC is designed as a free-market asset. When attention shifted to SATA and STRC price flagged, it may have raised the attention of opportunistic short-selling hedge funds.

By shorting aggressively, they could push the price down and start triggering margin calls and liquidations from folks who aggressively levered up their STRC positions.

The price action today is a clear liquidation cascade, rapidly pushing prices lower, in turn triggering additional liquidations.

3.
What happens now? The market will heal itself.

Opportunistic hedge funds will recognize that this is a firesale and the fundamentals are unchanged for STRC and step in as buyers. Shorts will close, becoming buyers. Individuals are getting a tremendous entry price for long-term holding STRC shares.

Buyers at this level will get ~13.7% effective yield. If STRC trades back to $100 and they sell, they get an easy +18% return.

4.
What will Strategy do?

Strategy will likely increase the dividend rate on June 30 - maybe to 11.75% but possibly to 12%. Buyers at the current price level then would get 14.2% effective yield from that point forward.

Strategy may also step in to buy STRC shares back. They could do this by issuing new shares of MSTR (currently at 1.14 mNAV) or by taking on traditional debt and deploying those funds to buy discounted STRC shares on the market.

If/when STRC trades back to $100, Strategy could then re-issue those STRC shares. The ~$15 delta per share could be used to buy BTC as pure accretion to MSTR holders, with no net change to amplification.

No doubt that Saylor has already at least considered this, and it wouldn't surprise me if they're currently doing this.

5.
In summary...

The market is freaked out that this depeg is like Terra/Luna... but this is not an asset like that. Strategy's balance sheet determines whether STRC continues to receive dividend payments... and Strategy's balance sheet is completely unchanged.

This is a leverage wipeout.

From this, the market will learn that Digital Credit is mostly very low volatility. But because it is a free market asset, the longer that a Digital Credit instrument trades within a tight range to par... the more leverage will inevitably pile up as people get greedy.

And that creates the conditions for a leverage wipeout depeg. Following that, the instrument will make its way back to par value as the market heals itself and recognizes that the dividend payments will continue uninterrupted because the issuer's balance sheet is unaffected.

[neppy @neppy]

Anxiety drops 99% when you’ve got $500K in the bank