You've heard of Strategy (MSTR), formerly known as MicroStrategy. You may’ve even heard of its little brother, Stretch (STRC). 

By the end of this you'll understand both, plus why the whole Bitcoin machine seized up this summer. (And where it’s headed.) 

Let’s start with the basics, because the basics are the part the headlines skip and the part that actually matters.

From Square One 

Strategy is a company that owns Bitcoin. 

About 845,000 of them. That's the whole business.
Everything else is plumbery.

The whole trick: the stock, MSTR, wants to trade for more than the Bitcoin-per-share is worth. 

Why? Because the market believes Strategy will keep buying more Bitcoin. 

When you buy MSTR, you aren't paying for a pile. You're paying for a pile that grows. Take away the growing and you've only got a pile. (And a pile isn’t what you’re paying for.) 

Simple so far? Great. 

But here’s where it gets complicated. 

Two Faucets 

All of this means Saylor has to keep buying Bitcoin. To keep buying, he needs money. To get money, he has two faucets.

Faucet one: sell stock. Print new MSTR shares, sell them, buy Bitcoin. Simple. The catch? Every new share shrinks everyone else's slice. Shareholders tolerate it. They don't love it. 

Faucet two: sell Stretch. STRC, nicknamed Stretch, is a preferred stock. A preferred stock is what happens when a bond and a stock have a baby but neither wants custody. 

Bonds repay. Stocks grow. A preferred does neither—it just pays you, forever, and that's the whole appeal. 

How it works: 

You hand Strategy $100. Strategy pays you $12 a year, forever. You get the yield. You give up the Bitcoin upside. Strategy gets cash that dilutes nobody who owns MSTR.

The STRC dividend is paid from a dedicated cash pile—$5.1 billion as of August 30, enough to cover a year of payments. That pile gets refilled by selling MSTR stock, selling Bitcoin, or issuing more Stretch.

That’s it. 

There’s Always a Catch

Faucet two isn't a perfect faucet. But it's a better faucet than faucet one. 

Mainly because Strategy is cleared to sell up to $21 billion of STRC, and as of the spring it had only used about $5 billion of that. 

But, if you know anything about catches, you know there’s always a catch: Strategy can only sell new Stretch when the old Stretch is trading near $100. 

This is crucial because it’s how the whole game works. Nobody buys a fresh $100 share from the company when the identical used share is going for $74 next door.

And on June 25th, that's exactly where Stretch was.

June: the faucet closed

On June 3rd, Stretch slipped below par. Three weeks later it was $74. 

The good faucet shut and Strategy stopped buying BTC. Saylor went quiet. MSTR fell to $82, down from $157 at the start of the year, while the broader market went up. 

The orange dot went dark.

The obvious move was to yank faucet one wide open and keep buying Bitcoin anyway. But Saylor did something less obvious.

July: fix the good faucet

On June 29th, Strategy announced a $1 billion program to buy back its own Stretch.

Remember, every Stretch share is a $100 obligation paying $12 a year. That’s expensive. (Last week alone that cost tens of millions in dividends.) 

Buying one back at $87 retires a $100 debt for $87 and kills the $12 dividend forever. And every dollar of buying pushes the price toward $100, which reopens the good faucet.

Saylor funded those buybacks in two ways. 

He sold MSTR, yes. And he also did what he claimed he would never do: sold Bitcoin. 

The company said the buybacks would taper as Stretch approached par. Instead they went $25 million, $81 million, $108 million, $132 million, $136 million, $151.8 million. Six weeks, six increases. 

But eventually, Stretch snapped back. 

STRC went from $74 to just under $98, where it sits today. 

August: the Bit Signal is back.

Last week, Strategy bought Bitcoin for the first time in ten weeks: 4,603 coins at an average of $80,318. 

That was a Bit Signal, and it was sent on purpose. Remember the premium—MSTR trading for more than the Bitcoin behind each share. 

It only holds while the market believes Saylor keeps buying. Go two months without buying and the belief slips, and the premium slips with it. 

He needs that premium, because with faucet two frozen, selling MSTR is the only way he can raise money right now. And selling MSTR only works while the premium holds. So the buy was him defending his one working faucet.

Here's where it gets interesting. Get Stretch back near $100 and hold it there, and Saylor wins twice.

First, he can sell new Stretch again—about $16 billion of Bitcoin-buying money that dilutes nobody. That's the diluting faucet closed and the clean one open.

Second, he can cut the interest rate. Stretch pays 12% a year on billions of dollars, and Strategy sets that rate itself—but only dares lower it when the price is strong. Trim it to 10% and the company saves tens of millions a year, every year.

What this means for Bitcoin

Two months ago the biggest buyer in Bitcoin stopped buying. Bitcoin fell. Now he's back, and the price is nosing at $80,000. 

But the buying so far is funded by selling MSTR stock, which is like buying groceries with your kids' college fund. 

It works. But it has a ceiling. 

The real money—~$16 billion of it—only comes online when Stretch holds $100.

Watch Strategy's weekly 8-K. 

The week the numbers flip—Stretch shares sold and zero bought back—the machine is running on its own again. 

That's the week Bitcoin gets more voltage, because Saylor can then buy. And it's the week MSTR stops bleeding, because the dilution ends.

Everything before that is Saylor arm-wrestling himself and charging admission.