Strategy's STRC preferred stock faced comparisons to Terra Luna's collapsed stablecoin after falling to record lows last week, but Benchmark-StoneX analyst Mark Palmer dismissed the parallel as fundamentally misguided in a Monday note. STRC dropped as low as $82.53 last week before recovering to close around $88.65 on Monday, prompting social media commentary linking it to TerraUSD's 2022 depeg that erased $40 billion in market value. Palmer argued that STRC differs fundamentally from Terra's algorithmic stablecoin structure, as the Bitcoin-buying firm's preferred stock is indirectly backed by Strategy's 847,363 Bitcoin holdings valued at $54.5 billion.
Palmer Distinguishes STRC from Algorithmic Stablecoin Model
Palmer stated that comparisons between STRC and Terra's ecosystem remain "fundamentally misguided," emphasizing three core distinctions. "STRC is not a stablecoin," Palmer wrote. "It is not backed by an algorithmic arbitrage mechanism, and it is not dependent on confidence in a reflexive token structure." TerraUSD attempted to maintain its dollar peg through a "mint-and-burn" framework with its sister token LUNA, operating without hard reserves. STRC conversely derives indirect backing from Strategy's Bitcoin reserves, which the Tysons Corner, Virginia-based firm confirmed on Monday total 847,363 Bitcoin.
STRC Trades 11.3% Below Par Value with 11.5% Dividend
STRC currently offers an 11.5% annual dividend and closed flat at $88.65 on Monday, approximately 11.3% below its $100 par value according to Yahoo Finance. Palmer noted that STRC is engineered to trade around the $100 mark, but its price has been cyclical since it debuted less than a year ago. When STRC trades at or above that threshold, Strategy issues more shares and uses the proceeds to purchase more Bitcoin. The product has lingered below its $100 par value for several weeks.
Strategy Accumulates Cash for Three Straight Weeks
The Bitcoin-buying firm has accumulated cash for three straight weeks, topping off its USD reserve as a way to communicate to preferred stockholders that dividend payments will continue flowing. Palmer wrote that when STRC trades below the $100 mark, its ability to purchase Bitcoin may be constrained, but that doesn't indicate a fundamental problem. "There is a meaningful difference between stating that Strategy's preferred stock funding engine has become less efficient," he said, "and asserting that the company's overall model is broken, as some of its detractors have suggested."
Benchmark Maintains $570 Price Target for Strategy Shares
Benchmark-StoneX reaffirmed its $570 price target for Strategy. The forecast is far above the multi-year high of $457 that the company's shares soared to in October. On Monday, Strategy shares fell 2.8% to $109, marking a fifth straight trading day of declines. Bitcoin was changing hands around $64,400, valuing Strategy's 847,363 Bitcoin holdings at $54.5 billion.
FAQ
What did Benchmark analyst Mark Palmer say about STRC on Monday?
Mark Palmer stated in a Monday note that comparisons between Strategy's STRC preferred stock and Terra Luna's collapsed stablecoin are "fundamentally misguided." He emphasized that STRC is not a stablecoin, is not backed by an algorithmic arbitrage mechanism, and is not dependent on confidence in a reflexive token structure.
How much Bitcoin does Strategy currently own?
Strategy signaled on Monday that it now owns 847,363 Bitcoin, valued at $54.5 billion with Bitcoin trading around $64,400. The Tysons Corner, Virginia-based firm's Bitcoin holdings provide indirect backing for its STRC preferred stock.
