Strategies rely on perpetual preferred shares to acquire 136,000 Bitcoin, with dividends snowballing over time, as share buybacks begin competing for capital against Bitcoin purchases.

Author: Will Canny (CoinDesk)

Compiled by: TechFlow

TechFlow Summary: Since institutions such as MicroStrategy (now renamed Strategy) and Strive launched treasury reserve strategies centered on crypto assets, perpetual preferred stocks have quickly emerged as the most potent capital leverage following convertible bonds and common stock dilution. Situated between debt and common equity, these instruments carry no fixed maturity or principal repayment pressure, successfully reaching traditional fixed-income investors who are sensitive to volatility but seek stable yields. In less than two years, they have facilitated the acquisition of over 136,000 BTC. However, this capital flywheel carries inherent risks: perpetual preferred stocks exhibit strong reflexivity; when market sentiment cools and share prices fall below par value, new issuances stall, forcing companies to spend heavily on buybacks to support the par price. Meanwhile, annual rigid USD dividend payments with double-digit yields continue to snowball, even compelling some companies to sell BTC to honor distribution commitments. Stretched across discounted buybacks, dividend payouts, and continuous BTC purchases, the balance sheets of BTC treasury companies are facing a true cycle test.

Fidelity Digital Assets and several analysts interviewed by CoinDesk stated that Bitcoin treasury companies like Strategy (MSTR) and Strive (ASST), which continuously purchase BTC to support demand across the largest crypto market, currently face difficult balancing acts.

On one hand, they require ample cash to fund their coin-buying operations; on the other, they must maintain investor appetite for new issuances of their core financing tool, perpetual preferred stocks. As the number of outstanding shares increases, the dividends they must pay also expand proportionally.

These securities sit between debt and common equity in the capital structure, offering regular dividends without voting rights. Fidelity research analyst Zack Wainwright wrote in a research report on Tuesday that over the 20 months since the instrument's introduction, they have cumulatively funded approximately 136,000 BTC in purchases, representing more than 0.5% of the cryptocurrency's maximum supply.

As the publicly traded company holding the most Bitcoin globally, Strategy is the absolute dominant force in this market. Its preferred stock (currently consisting of five distinct series) has become a litmus test for the sustainability of this capital operation model. Its first launched preferred product, STRK, debuted in February 2025.

Fidelity estimates the preferred stock market focused on Bitcoin at approximately $12 billion. By comparison, the global fixed-income market totals $150 trillion, indicating substantial room for growth in this segment.

Reaching Yield-Oriented Investors

By issuing preferred stocks that pay regular dividends and lack fixed maturities, these companies not only alleviate refinancing pressures but also successfully attract investors unwilling to hold Bitcoin directly.

"Perpetual preferred stocks brought Bitcoin into the sphere of yield-seeking investors, a demographic never reached by ETFs," said Mark Palmer, senior equity research analyst at StoneX.

Ryan Rasmussen, head of research at Bitwise, agreed that these products attract buyers who might avoid spot Bitcoin ETFs, though he expects ETFs will remain the larger primary demand channel.

"In the long run, I expect ETFs to remain the primary source of Bitcoin demand, while perpetual preferred stock issuance serves as a secondary tailwind, targeting a different cohort of investors (i.e., yield-oriented investors)," Rasmussen noted.

James Butterfill, head of research at CoinShares, pointed out that just looking at the STRC preferred stock, its floating dividend currently stands at approximately 12%, raising $7.5 billion during the period through late July 2026. This massive fundraising comes with ongoing periodic distribution costs.

Alex Blume, founder and CEO of institutional Bitcoin asset manager Two Prime, noted that products like STRC and Strive's SATA offer far more than just exposure to Bitcoin price risk. Their price action is also highly sensitive to management's operational execution, the issuer's debt fulfillment obligations, and the broader capital market environment.

He cited STRC briefly dipping into the $70 range in late June as an example of its potential volatility. He stated that continuously expanding issuance creates inherent tension between increasing BTC per common share, meeting USD-denominated dividend commitments, and avoiding BTC sales. At present, Strategy's preferred stock trades at approximately $99.40.

Stock Buybacks Compete with Coin Purchases for Funds

"The core issue is that demand for perpetual preferred stocks is highly reflexive," Palmer analyzed. He added that the premise of continuously buying BTC with preferred stock proceeds relies on the security trading near or above par value. Butterfill further noted that once it breaks below par, new issuances lose appeal, prompting companies to shift toward stock buybacks.

According to Butterfill, Strategy's latest weekly report shows the company spent $193 million repurchasing STRC, while simultaneously acquiring only 267 BTC. He added that the firm also significantly increased its preferred stock buyback authorization to $3 billion.

Butterfill emphasized: "While stock buybacks can certainly reduce future dividend costs, at this stage, they are directly competing with BTC purchases for precious capital."

He added that although cash reserves provide a buffer, Strategy was previously forced to sell some Bitcoin to pay preferred stock dividends.

ETFs Remain the Larger Demand Channel

Butterfill stated that US spot Bitcoin ETFs have seen cumulative net inflows of approximately $57 billion, holding total assets under management of roughly $106 billion.

ETF net subscriptions directly increase the funds' Bitcoin holdings, whereas preferred stock issuances give management discretionary control over capital deployment. He noted that while redemption waves could reverse ETF buying momentum, they would not leave behind continuous, rigid dividend payment obligations like preferred stocks do.

In Butterfill's view, preferred stocks essentially amplify market cycles: when external financing conditions are favorable, they powerfully support BTC accumulation expansion; conversely, once market sentiment deteriorates, this financial backing rapidly weakens.