Strategy (formerly MicroStrategy) continued its aggressive accumulation campaign, acquiring an additional 22,305 Bitcoins for approximately $2.13 billion from January 12th to January 19th, absorbing 3.38% of the total supply of the top cryptocurrency.
This represents 3.55% of the circulating supply of 19.97 million coins.
The purchases were made at an average price of $95,284 per Bitcoin, according to a Jan. 20 8-K filing with the Securities and Exchange Commission (SEC).
With this acquisition, Strategy’s total Bitcoin holdings will be 709,715 BTC, an asset worth approximately $64 billion. The company’s entire stack has a cost base of about $53.92 billion, or an average of $75,979 per Bitcoin, resulting in a paper profit of about $10.5 billion at current prices.
How Strategy is funding Bitcoin purchases
While the headline numbers highlight the company’s acquisition spree, the mechanics behind the acquisitions reveal a major shift in the way Strategy funds its operations.
These latest acquisitions were financed using proceeds from the market sale of the Company’s Class A Common Stock (MSTR), Perpetual Stretch Preferred Stock (STRC), and Series A Perpetual Strike Preferred Stock (STRK).
Last week, Strategies, led by Michael Saylor, sold 10,399,650 shares of MSTR stock for about $1.8 billion, according to SEC filings. The company still holds approximately $8.4 billion worth of shares to fund future BTC purchases.
However, activity on the preferred channel is increasing.
According to the filing, Strategy sold 2,945,371 shares of STRC stock for approximately $294.3 million (remaining 3.6 billion shares) and 38,796 shares of STRK stock (remaining 20.3 billion shares) for $3.4 million.
This increase in stakes indicates that the company’s attempt to turn Bitcoin treasury strategies into repeatable “yield SKUs” that can sit quietly in brokerage accounts or income portfolios is garnering significant interest.
Remarkably, this financial engineering created four distinct exposure tiers traded on the Nasdaq exchange. This means that no investment know-how is required as investors can purchase BTC through a regular brokerage account.
The product range is categorized by risk appetite and offers four different ways to trade strategies.
The centerpiece is the floating rate Series A Perpetual Stretch Preferred Stock (STRC). This security, which is expressly marketed as a “short-term high-yield credit,” currently pays an annual dividend of 11.00% in monthly cash installments.
Unlike standard bonds, whose yields are determined by market forces, STRCs are issuer-controlled products. The strategy retains the policy authority to adjust the dividend rate so that the stock trades near its $100 par value.
Data from STRC.live shows that the company has accumulated 27,000 BTC from STRC fundraisers.
Under STRC there is a fixed rate perpetual tier structure.
For investors who want a portion of their stock to rise, there is STRK (“Strike”). The annual dividend is 8% and is non-cumulative (meaning any missed payments are lost forever).
However, it functions as a hybrid, offering convertibility into equity that allows you to capture approximately 40% of the profits if Strategy’s common stock appreciates.
For risk-averse income seekers, the company offers STRF (“Strife”). This 10% perpetual preference stock cannot be converted into equity, but is at the top of the capital structure.
This is cumulative, meaning that companies will have to make up for late dividend payments later. The remaining capacity is $1.6 billion, which is the most conservative tier.
There is also a product called STRD (“Stride”). This is comparable to STRF’s 10% yield, but removes the safety net. It is non-cumulative and non-convertible.
If the strategy skips payments, investors have no recourse, giving STRD the sharpest risk-reward profile of any fixed-rate option. That leaves $1.4 billion.
Meanwhile, the company has also opened a European front. Last November, Strategy introduced the Series A Perpetual Stream Preferred (STRE). This is a euro-denominated security that pays an annual dividend of 10% quarterly.
This instrument has sharp teeth when it comes to non-payment. Dividends are cumulative and increase by 100 basis points for each period missed, up to a maximum of 18%.
Institutional investors pay attention to Strategy’s preferred stocks
Strategy’s list of financial engineering products has been successful in capturing a demographic that typically avoids cryptocurrencies: high-income tourists.
Some institutional filing data shows that the list of STRC holders is dominated by high-income preferred funds. The roster includes Fidelity Capital & Income Fund (FAGIX), Fidelity Advisor Floating Rate High Income (FFRAX), and Virtus InfraCap US Preferred Stock ETF (PFFA).
Meanwhile, the most impressive validation comes from BlackRock. The BlackRock iShares Preferred and Income Securities ETF (PFF) is a large fund that typically tracks an index dominated by sleepy bank and utility preferred stocks.
As of January 16, the fund’s net assets were $14.25 billion. Within its conservative portfolio, Strategy’s Bitcoin-related papers established a beachhead.
The ETF disclosed approximately $210 million in positions in Strategies’ STRC. STRF, STRK and STRD together hold about $260 million more. The ETF’s exposure to BlackRock’s strategy preferred stocks totals approximately $470 million, or 3.3% of the fund’s total.
Valentin Kosanovic, deputy director at Capital B, sees this as a tipping point for digital trust.
According to him:
“This is another clear, fact-based and undeniable demonstration that a wave of institutionalized legacy BTC-pegged financial products is becoming a reality.”
risk?
The mechanisms required to maintain these dividends create unique risks. The strategy is not to pay these yields out of operating profits in the traditional sense. Funding is provided through the capital markets.
STRC’s prospectus states that the cash dividend will be primarily funded through additional financing, including an open market offering of shares.
This creates a circular dependency. Strategy sells securities, buys Bitcoin, and pays dividends on those securities.
With this in mind, Michael Fanelli, partner at RSM US, highlighted several risks associated with this model, including the collapse of Bitcoin prices, lack of insurance coverage, and the fact that the product is unproven in a recession. He also noted that perpetual products do not have an expiration date.
However, Bitcoin analyst Adam Livingston countered that these products are “disconcerting” to traditional analysts. He claimed that “STRC is quietly turning Strategy into a private central bank for a yield-hungry world.”
According to him:
“STRC is a couponed ‘credit rail’ that can absorb bond demand, convert it into BTC at scale, and supply equity premiums that make the next raise easier, cheaper, and faster. It is a flywheel with bidding inside.”
(Tag Translation) Bitcoin
