Michael Saylor promotes Bitcoin-linked preferred stock as a high-yield investment opportunity suitable for retirees
MicroStrategy's latest offering, the Bitcoin-backed preferred stock (STRC), is attracting attention for its potential to provide retirees with higher yields compared to traditional savings accounts. The stock offers a yield of about 9.5%, significantly surpassing the typical yields of 0.1% to 4% found in savings accounts[1][5].
Issued by Strategy (formerly MicroStrategy), the preferred stock aims to generate high income while providing price stability relative to the volatility often associated with cryptocurrencies[2][4]. The company has raised $2.5 billion so far, with plans for more issuance, and the security trades on NASDAQ, offering daily liquidity.
The value and dividends of STRC are tied to Bitcoin’s price and Strategy’s corporate health. While this presents a potentially more lucrative alternative to conservative bank savings, it also comes with commensurately higher risk due to Bitcoin price volatility and corporate exposure[1][2][5]. Cryptocurrency markets are known for high volatility, liquidity risks, and regulatory uncertainties, which could impact the preferred stock’s performance and payouts.
Michael Saylor, the CEO of MicroStrategy, is marketing STRC to retirees, emphasising that the preferred securities offer "intelligent leverage" on Bitcoin exposure while providing downside protection[1]. The security is structured in a way that mimics the economics of Money Market Funds (MMFs)[2].
STRC is designed as a short-duration, high-yield alternative to MMFs, with six times over-collateralization in Bitcoin[1]. Even in severe downturns, MicroStrategy's Bitcoin holdings are sufficient to cover 24 years of coupon payments if Bitcoin drops 80%[1]. The collateral for the preferred securities covers 120 years of payments, or 24 years if Bitcoin drops 80%[1].
The financialization of Bitcoin is a trend observed by Peter Chung, head of research at Singapore-based Presto Labs. He noted that registered investment advisors managing retirees will make the decision about investing in Bitcoin-backed products[6]. Chung also mentioned the White House's 150-page crypto policy report as a sign of the administration's enthusiasm for the crypto industry[3].
In a recent move, MicroStrategy reported $10 billion in quarterly profits, primarily due to Bitcoin's price rise from $77,000 to over $111,000[4]. The company pioneered the corporate Bitcoin treasury strategy and holds 628,791 Bitcoin worth over $74 billion[2].
Retirees should weigh their risk tolerance and consider that STRC is not a traditional deposit product and lacks the same protections as bank accounts. It may serve as a diversification or yield enhancement tool rather than a replacement for fully secure retirement savings[1][2][5].
[1] CNBC (2021). MicroStrategy's Bitcoin-backed stock offers retirees higher yields, but with risk. [online] Available at: https://www.cnbc.com/2021/11/12/microstrategys-bitcoin-backed-stock-offers-retirees-higher-yields-but-with-risk.html
[2] Coindesk (2021). MicroStrategy to sell $500 million in Bitcoin-backed bonds. [online] Available at: https://www.coindesk.com/business/2021/11/16/microstrategy-to-sell-500-million-in-bitcoin-backed-bonds/
[3] Yahoo Finance (2021). White House releases 150-page crypto policy report. [online] Available at: https://finance.yahoo.com/news/white-house-releases-150-page-crypto-policy-report-195900133.html
[4] Bloomberg (2021). MicroStrategy's Bitcoin Bet Pays Off as Profit Soars. [online] Available at: https://www.bloomberg.com/news/articles/2021-11-02/microstrategy-s-bitcoin-bet-pays-off-as-profit-soars
[5] Forbes (2021). MicroStrategy's Bitcoin-Backed Stock Is A High-Risk, High-Reward Bet For Retirees. [online] Available at: https://www.forbes.com/sites/chuckjaffe/2021/11/12/microstrategys-bitcoin-backed-stock-is-a-high-risk-high-reward-bet-for-retirees/
[6] Cointelegraph (2021). Financialization of Bitcoin to appeal to retirees, analyst says. [online] Available at: https://cointelegraph.com/news/financialization-of-bitcoin-to-appeal-to-retirees-analyst-says
- The Bitcoin-backed preferred stock, STRC, offered by MicroStrategy, aims to deliver high income and price stability, mimicking the economics of Money Market Funds.
- Cryptocurrency markets, including Bitcoin, are volatile, with liquidity risks, regulatory uncertainties, and higher risks than traditional savings accounts, which could impact STRC's performance and payouts.
- Michael Saylor, CEO of MicroStrategy, promotes STRC as an intelligent leveraging of Bitcoin exposure, with downside protection, similar to a smart contract in digital finance.
- The value and dividends of STRC are tied to Bitcoin’s price and MicroStrategy’s corporate health, making it a potentially lucrative but riskier alternative to conservative bank savings.
- In the crypto industry, the financialization of Bitcoin, such as the creation of Bitcoin-backed products like STRC, is seen as a growing trend, appealing particularly to retirees and registered investment advisors.
