Strategy's STRC Isn't a Stablecoin, It Just Plays One on Crypto Twitter 🎭

Strategy's preferred stock STRC drew fresh comparisons to the collapsed TerraUSD-LUNA ecosystem last week as it drifted to record lows, but Benchmark-StoneX analyst Mark Palmer said the framing is "fundamentally misguided." The 11.5% dividend-paying product closed flat at $88.65 on Monday, about 11.3% below its $100 par value, and earlier fell as low as $82.53, according to Yahoo Finance.

In a Monday note, Palmer argued that the weakness in STRC has "fueled alarmist commentary across social media," overlooking core differences between the dividend-paying product and the two tokens that erased $40 billion in market cap. "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."

Most stablecoins are backed by cash and U.S. Treasuries, but TerraUSD attempted to maintain its dollar peg without hard reserves, relying instead on a "mint-and-burn" framework with sister token LUNA. That structure unraveled in 2022, and TerraUSD depegged as the protocol's Anchor Protocol was offering a 20% annual percentage yield on deposits. STRC, by contrast, is indirectly backed by Strategy's Bitcoin holdings, which the Tysons Corner, Virginia-based firm said now total 847,363 BTC, valued at $54.5 billion with $BTC changing hands around $64,400.

STRC is engineered to trade around the $100 mark and has been cyclical since debuting less than a year ago. When the preferred stock trades at or above that threshold, Strategy issues more shares and uses the proceeds to purchase more Bitcoin; when it trades below, the firm's ability to buy additional $BTC may be constrained. The company has accumulated cash for three straight weeks to reinforce its USD reserve and signal to preferred stockholders that dividend payments will continue.

Some analysts anticipate that Strategy will seek to increase the product's dividend rate in an attempt to support a recovery back toward $100. Palmer maintained that trading below par "does not mean there is a fundamental problem," pointing to the firm's Bitcoin holdings and accumulated cash as backstops that distinguish STRC from algorithmic tokens with no underlying reserves.