Preferred stock has emerged as a meaningful new funding source for bitcoin treasury companies, helping finance the purchase of 135,979 BTC through Oct. 5, according to Fidelity Digital Assets. The structure has opened a channel beyond spot bitcoin ETFs, especially for investors seeking yield rather than direct crypto exposure.
But analysts say the model used by companies including Strategy and Strive comes with a growing trade-off. The more perpetual preferred shares issuers sell to raise money for bitcoin purchases, the larger their ongoing dividend burden becomes, potentially limiting how much additional cash can be put to work in BTC.
A fast-growing funding tool
Fidelity research analyst Zack Wainwright wrote in a Tuesday report that preferred-stock issuance has funded nearly 136,000 bitcoin purchases in the roughly 20 months since the instrument was introduced for this purpose. Fidelity estimated the bitcoin-focused preferred market at about $12 billion, a small figure relative to the roughly $150 trillion global fixed-income market, suggesting room for further expansion.
These securities sit between debt and common equity in a company’s capital structure. They typically offer regular dividend payments, carry no voting rights and, because they are perpetual, do not impose a fixed maturity that would force refinancing on a set schedule.
Why issuers and investors are using them
For issuers such as Strategy and Strive, perpetual preferred stock provides capital that can be directed toward bitcoin accumulation while reducing near-term refinancing pressure. For investors, the appeal is different: the shares may offer income without requiring direct ownership of bitcoin.
StoneX senior equity research analyst Mark Palmer said perpetual preferreds have brought bitcoin exposure to income investors that ETFs did not reach. Bitwise head of research Ryan Rasmussen similarly said the products can attract buyers who may avoid bitcoin exchange-traded funds, although he expects ETFs to remain the larger source of long-term demand for bitcoin.
The strain of dividends and market pricing
The challenge is that every new preferred sale increases future dividend obligations. James Butterfill, head of research at CoinShares, said Strategy’s STRC, which currently carries a variable dividend of around 12%, raised $7.5 billion during 2026 through late July. That capital can support bitcoin buying, but it also creates a recurring payout commitment.
Alex Blume, founder and CEO of institutional bitcoin asset manager Two Prime, said products such as Strategy’s STRC and Strive’s SATA are shaped by more than bitcoin’s price. Their valuation can also reflect management execution, issuer obligations and broader capital-market conditions. He pointed to STRC briefly dropping into the $70 range in late June as an example of potential volatility. Strategy’s preferred stock was recently trading around $99.40.
According to Blume, growing issuance creates tension between boosting bitcoin per common share, meeting dollar-based dividend commitments and avoiding the need to sell bitcoin. Butterfill added that Strategy has already sold some bitcoin to help fund preferred dividends.
When buybacks compete with bitcoin purchases
Analysts also warned that the model depends on healthy market pricing for the preferred shares themselves. Palmer said demand for perpetual preferreds is reflexive: continued issuance works best when the securities trade at or near par. If they fall below that level, issuing more becomes less attractive.
In that situation, issuers may choose to buy back preferred shares instead of using cash for additional bitcoin purchases. Butterfill said Strategy’s latest weekly update showed $193 million spent repurchasing STRC while only 267 bitcoin were bought. He also said the company increased its preferred-stock repurchase authorization to $3 billion. Buybacks can lower future dividend costs, Butterfill said, but they compete directly with bitcoin purchases for capital in the present.
ETFs still dominate bitcoin demand
Even with the rapid growth of preferred-funded buying, analysts do not see it overtaking the ETF market. Butterfill said U.S. spot bitcoin ETFs have taken in about $57 billion in cumulative net inflows and hold roughly $106 billion in assets.
He contrasted the two channels by noting that net ETF creations directly increase funds’ bitcoin holdings, while preferred-stock issuance leaves management with discretion over how the proceeds are used. ETF redemptions can reverse demand, but they do not leave behind a continuing dividend obligation. Butterfill said preferreds can strengthen bitcoin buying when financing conditions are favorable, though that support may weaken as sentiment and pricing deteriorate. For now, analysts broadly expect ETFs to remain the larger demand engine, with preferred stock serving as a complementary channel aimed at yield-focused investors.
Source: www.coindesk.com