Variable rate preferred stock stabilizes crypto yield
Issuing variable rate monthly preferred stock backed by Bitcoin allows companies to strip out volatility and duration, offering investors a stable $100 par value with high yield.
The argument
Saylor detailed how MicroStrategy engineered 'STRC' (stretch) to act like a Bitcoin-backed money market instrument. By combining an adjustable credit spread with an at-the-market shelf registration, the issuer can absorb Bitcoin's volatility into its common equity while keeping the preferred stock trading stably at par.
The thesis, stress-tested
✓ What validates it
- ✓STRC maintaining a stable trading price of approximately $100 during periods of high Bitcoin volatility
- ✓Increased issuance volume of STRC or similar digital credit instruments by public corporations
▸ Risks discussed
- ▸Severe downward movements in Bitcoin's price can stress the collateral backing the preferred shares
- ▸The dividend yield is variable and can be adjusted downward if market conditions shift
Hear it yourself
"It's like like the issuer has the money for about 20 years right not if you were to borrow money from from a crypto exchange you have the money for 20 minutes right and if you were to borrow the money in a conventional margin loan you have the money for 20 hours to to two or three days but so I mean Bitcoin could fall 95% it doesn't…"
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