What to know : Strategy’s STRC preferred, yielding about 11.5% with monthly payouts, is estimated to have funded 7,000 BTC in purchases this week. Two Prime CEO Alexander Blume warns there is “no free lunch,” saying yields far above Treasuries imply added risk.
Around 7,000 bitcoin are estimated to have been purchased this week through Strategy’s (MSTR) perpetual preferred stock Stretch (STRC), underscoring how quickly the high yield instrument has become a key engine behind the company’s bitcoin accumulation.
But the structure carries risks, according to Alexander Blume, chief executive officer of Two Prime, an SEC registered investment adviser focused on institutional bitcoin yield strategies and bitcoin backed lending.
“There’s no free lunch,” Blume said. “A product that pays more than 6% over Treasuries must come with additional risk.”
Demand for the preferred shares has surged as investors search for higher returns. STRC currently yields at 11.5% and pays monthly cash distributions. Strategy has described the instrument as resembling a short duration, high yield savings instrument, with the dividend rate adjusted to help keep shares trading near their $100 par value while limiting price volatility.
The structure has helped accelerate Strategy’s bitcoin purchases. Market estimates suggest the company has bought more than 11,000 BTC over the past two weeks, bringing total accumulation through the product to roughly 34,000 BTC since it went live, according to STRC.live.
Corporate interest is also beginning to emerge. Asset manager Strive (ASST) recently disclosed a $50 million allocation to STRC, while digital credit firm Apyx said it recently purchased an additional 200,000 STRC shares, bringing its total holdings to 255,000 shares.
Blume said STRC was a major focus at the recent Strategy World conference, highlighting how central the product has become to the company’s capital strategy.
“We have seen a smattering of companies buy STRC,” Blume said, adding that some of the activity appears symbolic or partnership driven for now.
Blume also pointed to early efforts to build decentralized finance products on top of STRC, sometimes marketing them as savings like instruments despite volatility in the underlying asset.
STRC is designed to trade close to its $100 par value, but Blume said that is not guaranteed. A loss of confidence in the company, bitcoin or the preferred shares themselves could push the price below par and cause significant damage, he said.
STRC has on several occasions traded below its $100 par value, prompting the company to raise the dividend to help push the shares back toward par.
Blume added that strong momentum, available funding for interest payments and demand for high yield mean the structure is unlikely to face immediate problems.
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