Bitcoin has climbed more than 20 percent from its February lows and is currently trading near 77,000 dollars. However, many investors are now questioning whether this upward trend can continue.
According to Bitwise Chief Investment Officer Matt Hougan, one company has played an outsized role in driving this rally. He believes that Strategy’s aggressive accumulation of Bitcoin has been the most influential factor behind the recent price surge.
A Key Force Behind the Rally
While other elements have supported Bitcoin’s growth, including 3.8 billion dollars in ETF inflows since early March and renewed buying from long term holders, Hougan explained that a large share of the gains can be traced back to Strategy’s purchases. Over the past eight weeks, the company has acquired approximately 7.2 billion dollars worth of Bitcoin.
These acquisitions have been financed through the issuance of STRC, a perpetual preferred equity instrument. STRC is a form of preferred stock that blends features of both equity and debt. It is structured to trade at 100 dollars per share and currently offers an annual dividend yield of about 11.5 percent.
Strategy manages the share price by adjusting the yield. If STRC falls below 100 dollars, the company raises the interest rate to attract buyers. If it trades above that level, Strategy can issue more shares or reduce the yield to bring the price back toward its target.
Since its introduction, STRC has generally stayed close to its intended price. The dividend yield has already been increased from 9 percent to 11.5 percent to maintain investor demand. The main goal of issuing STRC is to raise funds for additional Bitcoin purchases, with most of the capital directed into the asset. Dividend payments are largely supported by new investor inflows, a structure Hougan argues is backed by the company’s large Bitcoin reserves rather than resembling a Ponzi scheme.
Evaluating Strategy’s Ability to Sustain Dividends
Strategy currently holds around 63 billion dollars in Bitcoin, compared to 8 billion dollars in debt and 14 billion dollars in preferred equity. In the event of liquidation, debt holders would be repaid first, followed by preferred shareholders.
This would leave approximately 41 billion dollars available for common equity holders. Based on current Bitcoin prices, Hougan estimates that the company could theoretically continue paying dividends for about 42 years, assuming no increase in Bitcoin’s value.
If Bitcoin were to grow at an annual rate of 20 percent, Strategy could potentially sustain dividend payments indefinitely. However, its ability to meet these obligations depends on both Bitcoin’s performance and how much additional STRC is issued. Increasing issuance raises dividend commitments and default risk, which can only be offset by gains in Bitcoin’s price.
Hougan emphasized that investor confidence relies on Strategy maintaining a careful balance between raising new capital and preserving the strength of its balance sheet. He also noted strong demand for STRC, suggesting the company could have raised even more funds in its latest offering.
With junk bond yields below 7 percent and declining interest in private credit markets, STRC’s 11.5 percent yield has attracted significant attention. Strategy’s current obligations stand at about 21 billion dollars, roughly one third of its Bitcoin holdings. Hougan believes this leaves room for an additional 10 billion to 15 billion dollars in STRC issuance before concerns begin to rise, with even greater capacity possible if Bitcoin prices continue to increase.#crypto#cryptonews https://coinsignals.net https://t.me/coinsignalpublic
