Summary Strategy's STRC preferred stock offers a 10.8% yield, trading near $97, with a board-adjusted dividend targeting a $99–$101 price range. STRC is a high-yield, Bitcoin-backed income instrument, with heavy overcollateralization and return-of-capital distributions, but lacks a hard price peg or FDIC insurance. STRC suits investors bullish on Bitcoin and Strategy's model, seeking high yield and willing to tolerate price volatility and occasional de-pegs. STRC is Strategy’s ( MSTR ) variable-rate preferred stock designed to trade around a $100 stated amount, with the board adjusting the dividend monthly to keep it roughly in the range of $99 to $101. At today’s ~$97 price and declared dividend rate, investors are effectively earning a 10.8% annualized cash yield, with current distributions treated as return of capital for U.S. tax purposes. There is no hard peg, no buyback commitment, and no contractual obligation to redeem at par. Strategy also uses its STRC ATM program to issue shares between $99 and $101, and it can call the shares at $101 plus accrued dividends, which caps upside. Given those design choices, I view STRC as a high-yield, short-duration Bitcoin-backed income instrument rather than something with absolute stability like cash. It is roughly comparable to money markets, as these can occasionally break the buck, albeit STRC will likely do this with a much higher frequency in these early days (it was launched just months ago). At current levels, the risk reward looks broadly fair: I rate it a Hold, with a willingness to upgrade to Buy in a distressed but not existential selloff below about $81. Mechanics, Peg, and Asset Backing Each STRC share has a $100 stated amount and liquidation preference. Strategy’s stated goal is to keep STRC trading around $100 by adjusting the dividend rate monthly. The board sets a “Monthly Regular Dividend Rate Per Annum” subject to two key constraints: In any given month, a cut is capped at 25 bps plus any fall in the relevant SOFR measure during the prior period. The rate cannot be set below the monthly SOFR level, which operates as a hard floor. Dividends are also cumulative, so even if suspended, they at the very least must be paid back when dividends are paid again. There is no symmetrical mechanism on the downside of the price. Strategy sells STRC via its ATM when the shares trade in the $99–$101 band and can call them at $101, but there is no buyback commitment when STRC trades below $99. The only real lever to push the price higher is a higher dividend, and management must balance that against dilution and its broader BTC accumulation strategy. In the capital stack, STRC is senior to the common and some junior preferred series, but junior to Strategy’s convertible notes and the fixed dividend senior preferred STRF. Economically, all of these claims rest on Strategy’s Bitcoin treasury, which is currently around 650,000 BTC and represents tens of billions of dollars in asset value even after the recent Bitcoin drawdown. The preferreds are not secured by specific Bitcoin, but the “BTC Rating” framework Strategy has shared implies that, after repaying all senior notes and STRF, STRC is still about 4.8x overcollateralized at current prices. In other words, Bitcoin would need to fall by more than 70% from here before the stated amount of STRC is meaningfully at risk in a liquidation scenario. Credit (Strategy) That overcollateralization can be cross-checked against the options market in a way similar to what I did for STRF . For example, 80% OTM June 2028 puts on IBIT (BlackRock’s spot Bitcoin ETF) trade at roughly 10% of the strike price. That is essentially the market price to insure an 80% Bitcoin crash over the next 2.5 years. Annualized, the cost is around 4%. That is an upper bound on the “Bitcoin catastrophe” risk premium for creditors or preferred holders, because a hedged investor who bought such puts would be fully protected against that tail event if it happened in the next 2.5 years. When you set that 4% tail hedge cost next to STRC’s effective yield of 10.8%, you get a rough sense of how much compensation the market is offering over the implied cost of catastrophic Bitcoin insurance. Now of course, you must also consider that the durations here are a little different. STRC is meant to be very low duration, and the put expiring in 2.5 years has greater duration. And you should also factor in the risk free rate of the 3 month T-bill, which is 3.8% right now. So the all-in credit spread over the catastrophe-insured rate is 10.8% - 3.8% - 4% = 3%. This is probably not obviously absurd in either direction, especially once you consider that STRC has any price appreciation upside capped by its peg mechanics and the fact that STRC is so new and the market is still finding the best way to price such an instrument. Bitcoin Catalysts and Dividend Sustainability The sustainability of STRC dividends is ultimately a question about Strategy’s ability to keep playing its core game: raising capital and rotating it into Bitcoin, while using a portion of that funding capacity to pay preferred dividends. I believe two sets of catalysts matter most: Bitcoin’s price path and the structure of demand for Bitcoin exposure. On the Bitcoin side, the long-term bull case that underpins all of Strategy’s preferreds is Bitcoin’s fixed supply and growing institutional demand. The recent approval and growth of U.S. spot Bitcoin ETFs (including IBIT) has created a structurally new buyer base who can now own Bitcoin exposure through a familiar fund wrapper and marginable security. Layered on top of that are macro factors: structurally large fiscal deficits, periodic real rate suppression, and ongoing fiat debasement fears. Those are the same ingredients that have historically supported gold and other hard assets. If you believe Bitcoin continues to gain share as a macro asset over the next decade, a permanent 70–80% drawdown from current levels is a truly low probability tail event (which again can be priced in the options market). On the demand and funding side, Bitcoin’s financialization clearly helps STRC. The deeper and more liquid Bitcoin derivatives and ETF markets become, the easier it is for Strategy to monetize its treasury indirectly through equity and preferred issuance, without needing to sell appreciated coins and realize taxable gains. That is exactly the logic I describe in my STRF article . Some people might be concerned that having no taxable earnings and profits makes the preferred stock of a company uninvestable… Strategy can get the money from its BTC holdings without selling the BTC because it can sell its own common equity, MSTR, which represents an ownership stake in the BTC holdings (as well as software business). This is actually a tax-advantaged way to “sell” BTC without generating a capital gains tax burden.” As long as Bitcoin remains investable and attractive for large pools of capital, Strategy should be able to intermittently tap the equity and preferred markets to fund dividends on STRC. The board can move that rate up when it wants to pull the price up to $100. They can move it down when the peg is stable enough, although this is always subject to the SOFR floor and adjustment caps. For STRC specifically, the key judgment call is whether the path implied by catalysts like ETFs, corporate and institutional adoption, and macro tailwinds is strong enough to make a 70%+ sustained Bitcoin collapse and a total freezing of capital markets a remote tail event. If your answer is yes, then the 4.8x overcollateralization and current yield look attractive. If your answer is no, then even today’s double digit yield is arguably not enough. STRC Versus Alternatives From a long term income investor’s perspective, the right question is: “How does this stack up against other double-digit yield opportunities once you factor in the risks?” Broad U.S. high yield credit, for example, yields roughly 6.8–7.0% in aggregate . Those bonds are unsecured obligations of hundreds of different companies, with no specific collateral backing and full exposure to corporate default cycles, but they are diversified and do not rely on Bitcoin. BDCs, mREITs, and credit CEFs can offer yields in the 9–12% range, again with different risk drivers like spread risk, credit risk, and funding risk, but not concentrated Bitcoin exposure. Compared to those, STRC offers: A higher headline yield than most alternatives. An asset base that is very visible and, at today’s levels, heavily overcollateralized. This is also something high-yield credit doesn’t have. Most of the time the issuer doesn’t have the money and is relying on uncertain future earnings to get the money. Strategy in contrast currently has 4.8x the money, although it sits in a volatile asset that has historically appreciated significantly. A tax profile where distributions are currently expected to be return of capital, meaning long term tax deferral since income goes towards reducing your cost basis (once cost basis hits zero, then you pay capital gains on the income). This is something most other yield sources do not have and it makes the “tax-conscious” effective yield of STRC much higher. What STRC does not offer is a symmetric payoff. The peg mechanics plus ATM issuance and call feature create a structure where your best outcome is earning the monthly dividend and perhaps a small amount of capital appreciation toward $100–$101, while your worst-case outcome in a bad Bitcoin or funding environment is a very sharp de-peg with no fast path back. As you can imagine, the path back to $100 would involve Strategy raising the dividends until demand returns to push the price back to $100, but clearly no one could predict how long this would take or how high the dividend would need to be raised. Another important difference is that STRC's dividend rate can easily fall after it stays at the $100 peg for a long time and the board deems it to be stable. Most other fixed income products do not have this issue. Conclusion STRC’s design is clever. You get a double-digit, ROC dividend, a board that will try to aim the price around $100 by adjusting the dividend, and a heavily overcollateralized asset base. You give up any real upside above par, any guarantee of par in a hurry, and the comfort of FDIC insurance or a diversified credit pool. For investors who understand Strategy’s model, buy the long-term Bitcoin thesis, and are comfortable holding through occasional de-pegs, STRC can be a useful piece of a high-yield income portfolio. Around $97, a Hold makes sense. Below about $81, assuming the move is driven by random fear rather than a fundamental failure in the Bitcoin network or a lethal attack on Strategy, I would start to see it as more of a bargain and rate it a Buy. At that point, you are effectively getting paid a higher double-digit yield on a security that is still backed by several turns of Bitcoin collateral, with the potential for a 25% appreciation back to the $100 peg.
