Analyst: STRC Isn’t Terra — BTC-Backed Preferred, Not an Algorithmic Stablecoin
Amid a wave of social-media alarmism, Benchmark—StoneX analyst Mark Palmer is pushing back on comparisons that liken Strategy’s preferred stock, STRC, to the Terra/LUNA collapse of 2022. While STRC has been under pressure and briefly tumbled to fresh lows last week, Palmer says equating it with Terra’s failed stablecoin ecosystem is “fundamentally misguided.” Why the comparison flared up STRC’s sell-off and its double-digit yield (currently about an 11.5% annual dividend) prompted some commentators to use the same language people remember from Terra’s implosion — where TerraUSD (UST) and sister token LUNA lost roughly $40 billion in market value after an algorithmic peg failure. A viral tweet even referred to STRC as “depegged,” fuelling panic. Palmer’s core rebuttal Palmer emphasizes that STRC is not a stablecoin and does not share the structural flaws that sank Terra. Key differences he highlights: - STRC is not backed by an algorithmic arbitrage mechanism nor dependent on a reflexive token pair. - TerraUSD relied on a mint-and-burn scheme with no hard reserves; most mainstream stablecoins, by contrast, are backed by cash and U.S. Treasuries. - STRC is indirectly backed by Strategy’s large Bitcoin holdings rather than an algorithmic protocol. How STRC actually works STRC is engineered to trade around a $100 par value. When its market price is at or above $100, Strategy can issue new preferred shares and use the proceeds to buy more Bitcoin. The product has traded below $100 for weeks, limiting that funding “engine” and contributing to price weakness — but, Palmer argues, that is not the same as a broken corporate model. On-chain and balance-sheet context Strategy, the Tysons Corner, Virginia–based Bitcoin buyer, reported owning 847,363 BTC on Monday—about $54.5 billion worth at roughly $64,400 per coin. The preferred stock slipped as low as $82.53 last week and closed Monday at $88.65, roughly 11.3% below par. The company has also been building its USD reserve for three consecutive weeks, a move Palmer says is meant to reassure preferred-stock holders that dividend payments will continue. Market reaction and outlook Speculation is rife that Strategy could raise the STRC dividend to help lift the price back toward par, and that’s one of several levers the company can deploy. Benchmark—StoneX reaffirmed a $570 price target for Strategy’s common shares — well above the company’s multi-year high of $457 reached in October. Strategy’s stock traded down 2.8% to $109 on Monday, marking its fifth straight day of declines. Bottom line The recent STRC weakness has reignited fears, but regulators, analysts, and investors should distinguish between a funding inefficiency for a dividend-bearing preferred share and an algorithmic stablecoin collapse. According to Palmer, the comparison to Terra misses the product’s fundamental design and the firm’s sizable Bitcoin backing. Read more AI-generated news on: undefined/news
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