‘Not circular’: Benchmark defends Strategy’s STRC bitcoin accumulation model

Strategy’s STRC preferred shares, which have acted as the firm’s primary mode of funding its bitcoin purchases this year, have analysts, investors, and onlookers split on how sustainable and risk-free the model is.

In a Wednesday report, Benchmark analyst Mark Palmer pushed back against critiques framing STRC as a “circular” Ponzi scheme structure, saying they “mischaracterize” how Strategy raises and deploys capital.

Palmer described STRC as a piece of a “deliberate and durable” model that “converts demand for yield into long-term bitcoin exposure.”

“Strategy is not recycling capital in a vacuum,” Palmer wrote, arguing capital raised through its preferred instruments ultimately ends up on the bitcoin treasury company’s balance sheet.

STRC ammo for bitcoin buys

STRC is a variable-rate perpetual preferred stock that pays a roughly 11.5% annual dividend. It is designed to trade at or near $100, with the dividend rate adjusted to maintain that peg.

According to the company’s 8-K filings with the SEC, Strategy raised roughly $3.5 billion in the first three weeks of April, with more than 85% of that total coming from its STRC preferred stock.

The proceeds were deployed in three consecutive weekly buys totaling 51,364 bitcoin (BTC), worth more than $3.9 billion at current prices.

Strategy Buys — Strategy bitcoin buys. Source: SaylorTracker

Strategy (MSTR) now holds 818,334 BTC worth roughly $62.5 billion and has returned to an unrealized profit of about $700 million after spending much of the past six months underwater.

Benchmark also argues that this model is not dependent on continuous issuance to survive, noting that Strategy could cover preferred dividends by selling a portion of its bitcoin if needed.

Critics, however, say any such move by the largest corporate bitcoin holder would likely be seen as a major red flag that something is wrong, leading to a broad sell-off.

ETF route

Not all analysts agree with Palmer. In a separate note on Thursday, Grayscale’s Zach Pandl said instruments like STRC are ultimately a “directional bet” on bitcoin’s price, with payouts dependent on continued appreciation.

He compared their risk profile to high-yield corporate debt and said spot bitcoin ETFs still remain the “cleanest” way for investors to gain exposure, aside from buying the asset outright.