Glossary
Every term you'll encounter on this site — and in the wild when reading about Bitcoin and Strategy — defined clearly and concisely. Bookmark this page.
21/21 Plan
Saylor's plan to raise $42 billion — $21 billion in equity and $21 billion in debt — to buy Bitcoin over 3 years. Announced in late 2024. This is the engine behind all the preferred stock issuances.
Learn more about the Strategy →Bitcoin
Digital money with a fixed supply of 21 million coins. No government or company controls it. Created in 2009 by the pseudonymous Satoshi Nakamoto. The first and most valuable cryptocurrency — and the only one Saylor considers truly decentralized.
Why Bitcoin matters →Blockchain
A public ledger that records every Bitcoin transaction ever made. Distributed across thousands of computers worldwide — there's no single point of failure or control. Anyone can download the full blockchain and verify any transaction, ever.
Capital Gains
Profit from selling an investment. Long-term capital gains (assets held 1+ year) are taxed at a lower rate — typically 15% for most people — versus ordinary income. Short-term gains (held less than a year) are taxed as regular income.
See the tax advantage →Capital Stack
The order in which investors get paid if a company needs to distribute funds. Senior = first to get paid and last to lose. Junior = higher yield but lower priority. Strategy's stack runs: STRF → STRK → STRC → STRD → MSTR shareholders.
See the full capital stack →Convertible Note
Debt that can convert to equity under certain conditions. Strategy issues convertible notes to raise capital to buy Bitcoin. They pay interest like a bond, but holders can exchange them for MSTR shares if the stock price hits a certain level.
Cost Basis
What you paid for an investment. Your cost basis determines how much gain or loss you have when you sell. With Strategy preferred stocks, the return-of-capital treatment gradually reduces your cost basis each year you hold — which is the whole tax magic.
How cost basis works with STRD →Dollar Cost Averaging
Investing a fixed amount on a regular schedule regardless of price. If you put $500 in STRD every first Monday of the month, you buy more shares when the price is low and fewer when it's high. Over time, this reduces the impact of short-term volatility on your average purchase price. Simple. Effective. Emotionally sustainable.
Effective Yield
The actual annual return based on what you paid — not the par value. If STRD pays $10/year and you bought it at $67, your effective yield is 14.9%. If you bought at $100, your effective yield would be 10%. The dividend doesn't change; your personal yield depends on your purchase price.
See the yield calculator →Fiat
Government-issued currency not backed by a commodity like gold. The word comes from Latin — "let it be done." Fiat money gets its value from government decree and trust. The problem: governments can print unlimited amounts of it, eroding the purchasing power of everyone who holds it.
Why fiat fails →Halving
Every approximately 4 years, the rate of new Bitcoin creation is cut in half. Bitcoin miners receive newly created Bitcoin for securing the network — the halving reduces that reward. Less new supply entering the market historically precedes price appreciation. The most recent halving was in April 2024.
Why the halving matters →IMST — Bitwise MSTR Option Income Strategy ETF
A covered call ETF from Bitwise that generates income by selling options on MSTR. Similar strategy to MSTY but from a different fund provider — which helps avoid the "substantially identical" issue for IRS wash-sale purposes, enabling tax-loss harvesting swaps between the two.
Full IMST breakdown →Lightning Network
A payment layer built on top of Bitcoin that enables fast, cheap, near-instant transactions. Solves Bitcoin's throughput limitation for small everyday payments without changing the base layer. Used for things like micropayments, streaming payments, and point-of-sale transactions.
Michael Saylor
Co-founder and Executive Chairman of Strategy (formerly MicroStrategy). Pioneered the corporate Bitcoin treasury strategy starting in August 2020. Possibly the most vocal and articulate Bitcoin advocate in corporate America. Gives 4-hour presentations about Bitcoin for fun. His thesis: Bitcoin is the best monetary technology ever created, and companies should hold it instead of cash.
The Saylor story →MSTY — YieldMax MSTR Option Income ETF
A covered call ETF from YieldMax that sells options on MSTR to generate monthly income. Yields can be enormous (80%+) because MSTR's volatility makes options very valuable. Trade-off: your upside is capped and NAV tends to erode over time if MSTR doesn't keep running.
MSTY full breakdown →MSTR — Strategy Common Stock
The ticker symbol for Strategy's common stock on the Nasdaq. Designed to deliver approximately 2x Bitcoin's volatility and returns. The lowest position in the capital stack — highest potential upside, last to get paid. No dividend. Pure growth play.
MSTR full breakdown →Overcollateralized
Having more assets than liabilities. Strategy holds far more Bitcoin (worth hundreds of billions at current prices) than needed to cover all its dividend and debt obligations (measured in the tens of millions annually). This overcollateralization is a key reason preferred shareholders feel secure about dividend payments.
Preferred Stock
A type of stock that pays a fixed dividend and ranks above common stock if the company winds down. Lower risk than common stock, but less upside. Strategy issues four types: STRF (senior), STRK (convertible), STRC (savings), and STRD (high yield). Each has different risk/reward characteristics.
All preferred stocks explained →Qualified Dividend
A dividend taxed at the lower long-term capital gains rate (typically 15% for most taxpayers) rather than as ordinary income. After your cost basis in a Strategy preferred stock reaches zero, subsequent dividends are reclassified as qualified dividends — the most favorable dividend tax treatment available.
The full tax story →Quantitative Easing (QE)
When a central bank creates new money to buy assets (typically government bonds or mortgage-backed securities). This expands the money supply, which tends to inflate asset prices and reduce the purchasing power of existing cash. The Fed's aggressive QE programs post-2008 and post-2020 are a core part of the argument for Bitcoin as a hedge.
Why QE matters for Bitcoin →Return of Capital
When a dividend payment reduces your cost basis instead of being taxed as income in the current year. Tax is deferred until you sell. Strategy's preferred stock dividends are classified this way — which is why you can receive years of dividend income without owing taxes until you eventually sell the shares.
See the year-by-year example →Satoshi
The smallest unit of Bitcoin. 1 Bitcoin = 100,000,000 satoshis (sats). Named after Bitcoin's pseudonymous creator, Satoshi Nakamoto. Used for small transactions and precision — saying "I'll pay you 10,000 sats" is easier than "0.0001 BTC."
Self-Custody
Holding your own Bitcoin private keys — meaning no exchange, bank, or third party controls your funds. "Not your keys, not your coins." The alternative is holding Bitcoin on an exchange, which means trusting them not to go bankrupt (see: FTX). Hardware wallets like Ledger or Coldcard enable self-custody.
Step-Up Basis
When you inherit investments, the IRS resets your cost basis to the market value on the date you inherit — wiping out any deferred gains. This means the years of return-of-capital deferred gains in your STRD position disappear for your heirs. They start fresh, at the current price, with a clean slate for return-of-capital deferrals.
The inheritance bonus explained →STRC — Strategy Savings Preferred
Strategy's "savings account" preferred stock. Pegged near $100 through a variable rate mechanism. Pays approximately $10.75/year in monthly installments. Most liquid of the preferred stack. Best comparison: a money market fund with higher yield and Bitcoin upside optionality.
Full STRC breakdown →STRD — Strategy High Yield Preferred
Strategy's highest-yielding preferred stock. Pays $10/year at approximately 14.9% effective yield (because it's trading at a discount to par). Optional dividends, but Pete considers the dividend essentially certain given the company's overcollateralization. Pete's personal favorite in the stack.
Full STRD breakdown →STRF — Strategy Senior Preferred
Strategy's most senior preferred stock. Pays $10/year (~9.4% effective yield). Safest product in the stack — first to get paid, last to be at risk. Cumulative dividend: if a payment is ever missed, it accrues and must be paid before any other shareholders receive anything.
Full STRF breakdown →STRK — Strategy Convertible Preferred
Strategy's convertible preferred stock. Pays $8/year (~9.1% yield). Converts 10-for-1 into MSTR shares if MSTR exceeds $1,000/share. Combines bond-like income with equity-like optionality for when/if MSTR significantly appreciates.
Full STRK breakdown →Tax Loss Harvesting
Selling a losing position to record a capital loss for tax purposes, then immediately buying a similar (but not identical) investment to maintain your market exposure. The recorded loss can offset other capital gains — or up to $3,000 of ordinary income annually, with unlimited carryforward. MSTY and IMST are the typical swap pair in the Strategy ecosystem.
The full tax harvesting strategy →Treasury Reserve
Assets a company holds as a store of value on its balance sheet. Most companies hold cash or T-bills. Strategy holds Bitcoin as its primary treasury reserve — effectively betting that Bitcoin will preserve value better than cash over time. This is the foundation of the entire Strategy thesis.
Wash Sale
An IRS rule that disallows a tax loss if you sell a security and buy the same (or "substantially identical") security within 30 days before or after the sale. This is why you swap MSTY for IMST when tax-loss harvesting — different funds, different issuers, so the IRS considers them distinct securities and allows the loss.
Tax-loss harvesting with MSTY/IMST →Yield
Annual income divided by price. If a stock pays $10/year and trades at $100, the yield is 10%. If the price rises to $200, the yield drops to 5%. Same $10 payment — lower percentage return on what you paid. Yield and price always move in opposite directions for fixed-income instruments.
Bond Pricing 101 →