Bitcoin has rebounded more than 20% from its February lows and is trading near $77,000, but market participants are debating whether this rally can be sustained.
Bitwise Chief Investment Officer Matt Hougan argues that aggressive purchases by Strategy have become the “single biggest factor” behind the recent price surge.
Hidden Driver
Other elements have supported Bitcoin’s upward move—about $3.8 billion in ETF inflows since March 1 and renewed accumulation by long-term holders—but Hougan explained that a large share of the recent gains stems from Strategy’s buying. Over the past eight weeks, Strategy has added roughly $7.2 billion worth of Bitcoin.
Those acquisitions have been financed through the issuance of STRC, a perpetual preferred equity instrument. STRC functions as a form of preferred stock with characteristics of both equity and debt. It is structured to trade at $100 per share while offering a high dividend yield, currently around 11.5% annually.
Strategy manages STRC’s price target by adjusting the dividend yield. If STRC trades below $100, the company can raise the dividend to attract buyers; if STRC trades above $100, Strategy can issue additional shares or reduce the dividend to bring the price back toward $100.
Since its launch, STRC has generally hovered close to its $100 target. The dividend rate was increased from an initial 9% to 11.5% to maintain demand. The primary goal of issuing STRC is to raise capital for further Bitcoin purchases, and most proceeds have been deployed into the asset. Dividend payments are largely funded by capital raised from new investors; Hougan emphasizes that this structure is supported by Strategy’s substantial Bitcoin holdings rather than being a Ponzi scheme.
Strategy’s Dividend Capacity
Strategy holds roughly $63 billion in Bitcoin, backed by about $8 billion in debt and $14 billion in preferred equity. In a liquidation, debt holders would be paid first, followed by preferred shareholders, leaving around $41 billion for common equity holders at current prices. Based on these figures, Hougan estimates that the company could hypothetically sustain its dividend payments for about 42 years if Bitcoin’s price remains flat.
If Bitcoin appreciates at an average annual rate of 20%, Strategy could potentially sustain dividend payments indefinitely. But the company’s ability to meet its obligations depends on both future Bitcoin performance and the scale of additional STRC issuance. Issuing more STRC raises dividend liabilities and default risk unless offset by BTC price gains. Hougan notes that investor confidence hinges on Strategy striking a balance between raising capital and preserving balance sheet strength.
Demand for STRC appears strong; Hougan indicated that Strategy likely could have raised more capital in its most recent offering. With junk bond yields below 7% and waning interest in private credit, STRC’s 11.5% yield looks attractive to some investors.
Currently, Strategy’s obligations total about $21 billion, roughly 33% of its Bitcoin holdings. Hougan believes this leaves room for an additional $10 billion to $15 billion in STRC issuance before investor concerns may rise, and even more issuance could be feasible if Bitcoin’s price increases.