Strategy (formerly MicroStrategy) acquired an additional 22,305 Bitcoin for approximately $2.13 billion between January 12 and 19, continuing an aggressive accumulation campaign that has absorbed 3.38% of the total supply of the top cryptocurrencies.
That amounts to 3.55% of the circulating supply of 19.97 million coins.
The purchases were made at an average price of $95,284 per bitcoin, according to a Jan. 20 report from 8-K. submit with the Securities and Exchange Commission (SEC).
The latest acquisition brings Strategy’s total Bitcoin holdings to 709,715 BTC, a treasure worth approximately $64 billion. The company’s cost basis for the total stack is about $53.92 billion, or an average of $75,979 per bitcoin, which implies about $10.5 billion in paper profits at current prices.
How Strategy Funds Its Bitcoin Purchases
While the main issue highlights the company’s ruthless purchases, the mechanics behind the purchase reveal a significant shift in the way Strategy finances its operations.
These latest acquisitions were funded using proceeds from the market sales of the Class A common stock (MSTR), the Stretch Perpetual Preferred Stock (STRC) and the Series A Perpetual Strike Preferred Stock (STRK).
The Michael Saylor-led Strategy sold 10,399,650 shares of MSTR for about $1.8 billion last week, according to the SEC filing. It still has about $8.4 billion worth of stock to fund future BTC purchases.
However, the preferred channel sees increased activity.
The filing showed that Strategy sold 2,945,371 STRC shares for approximately $294.3 million (with $3.6 billion shares remaining) and 38,796 STRK shares for $3.4 million (with $20.3 billion shares remaining).
This increased stake shows that the company’s attempt to turn its bitcoin treasury strategy into a repeatable “yield SKU” that can sit quietly in brokerage accounts and income portfolios is earning significant interest.
Notably, this financial technique has created four different levels of exposure that are traded on the Nasdaq stock exchange. This means that investors do not need BTC knowledge to invest, because they can simply buy it through a regular investment account.
The product range is segmented based on risk appetite and offers four different ways to play the strategy trading.
The headline act is the Variable Rate Series A Perpetual Stretch Preferred Stock, or STRC. Explicitly marketed as “high-yield, short-term credit,” this security currently pays an annual dividend of 11.00% in monthly cash installments.
Unlike a standard bond where market forces dictate returns, STRC is an issuer-managed product. The strategy retains the policy power to adjust the dividend rate to ensure the stock trades near its par value of $100.
Facts from STRC.live shows that the company has collected 27,000 BTC from the STRC fundraiser.
Under STRC there is a layered structure of perpetuals with fixed interest rates.
For the investor who wants a piece of the stock price, there is STRK (“Strike”). It pays an annual dividend of 8% and is non-cumulative (meaning missed payments are lost forever).
However, it functions as a hybrid, offering convertibility into stock that captures about 40% of the gains if Strategy’s common stock rises.
For the risk-averse income seeker, the company offers STRF (“Strife”). This perpetual preference of 10% cannot be converted into shares, but sits higher in the capital structure.
It is cumulative, meaning the company must make up any missed dividend payments later. With a remaining capacity of $1.6 billion, this represents the most conservative level.
There is also the STRD instrument (“Stride”), which matches the 10% return of STRF, but removes the safety net. It is non-cumulative and non-convertible.
If Strategy misses a payment, the investor has no recourse, giving STRD the sharpest risk-reward profile among fixed income options. There is still $1.4 billion left.
The company has now even opened a European front. Last November, Strategy introduced the Series A Perpetual Stream Preferred (STRE), a euro-denominated security with a 10% annual dividend paid quarterly.
This instrument has sharp teeth in the area of default. The dividend is cumulative and increases by 100 basis points per missed period, up to a maximum of 18%.
Institutional investors turn to Strategy’s Preferred
Strategy’s financial engineering product list has successfully reached a demographic that typically shuns crypto: the income tourist.
Data from several institutional files show that high-income and preferred funds populate the list of STRC holders. The selection includes the Fidelity Capital & Income Fund (FAGIX), Fidelity Advisor Floating Rate High Income (FFRAX) and the Virtus InfraCap US Preferred Stock ETF (PFFA).
Meanwhile, the most notable validation comes from BlackRock. The BlackRock iShares Preferred and Income Securities ETF (PFF) is a massive fund that tracks an index typically dominated by sleepy banking and utility companies.
As of January 16, the fund had $14.25 billion in net assets. Within that conservative portfolioStrategy’s Bitcoin-linked paper has established a beachhead.
The ETF disclosed an approximately $210 million position in Strategy’s STRC. It owns another ~$260 million in STRF, STRK and STRD. In total, BlackRock’s ETF exposure to preferred strategies is approximately $470 million (or 3.3% of the total fund).
Valentin Kosanovic, Deputy Director at Capital B, viewed this as a turning point for digital credit.
According to him:
“This is yet another clear, factual, indisputable demonstration of the materialization of the wave of institutionalized BTC-linked financial products.”
Risks?
The machinery required to maintain these dividends creates a unique set of risks. Strategy does not pay for these returns from corporate profits in the traditional sense of the word. It finances them through the capital markets.
The company’s prospectus for STRC states that cash dividends are expected to be funded primarily through additional capital raising, including the offering of shares to the market.
This creates a circular dependency: Strategy sells securities to buy Bitcoin and then pays dividends on those securities.
With this in mind, Michael Fanelli, a partner at RSM US, marked There are several risks associated with this model, including Bitcoin price crashes, the lack of insurance coverage, and the fact that the products are unproven in recessions. He also noted that the perpetual products have no expiration date.
However, Bitcoin analyst Adam Livingston countered that the products are a “mind-bender” for traditional analysts. He argued that “STRC Strategy is quietly turning into a private central bank for the world with low returns.”
According to him:
“STRC is a coupon-bearing ‘credit rail’ that can absorb demand for fixed income, convert it into BTC at scale, and then fuel the equity premium that makes the next raise easier, cheaper, and faster. That’s a flywheel with a bid in it.”