According to Benchmark-StoneX analyst Mark Palmer, Strategy’s STRC is currently facing market pressure, yet it bears no resemblance to the stablecoin project that triggered a massive crypto crash in 2022. In a note released Monday, Palmer argued that circulating narratives on social media linking the two are fundamentally misguided and overlook the core mechanics of the product.
Distinguishing STRC from Terra
Palmer emphasized that STRC is not a stablecoin. Unlike TerraUSD and LUNA, which relied on an algorithmic mint-and-burn mechanism to artificially maintain a peg and eventually erased 40 billion dollars in market value, STRC functions differently. It is backed indirectly by the Bitcoin assets held by Strategy. The firm, based in Tysons Corner, Virginia, currently holds 847,363 Bitcoin, valued at 54.5 billion dollars with the digital asset priced around 64,400 dollars.
Trading Dynamics and Performance
STRC is engineered to trade around the 100 dollar mark. When the price stays at or above this threshold, Strategy utilizes proceeds from new share issuances to acquire more Bitcoin. Recently, however, the product has drifted below its par value. On Thursday, it fell to a low of 82.53 dollars, and by Monday, it closed at 88.65 dollars, approximately 11.3 percent below its 100 dollar par value. The product currently offers an 11.5 percent annual dividend.
Future Outlook and Company Strategy
Some analysts suggest that the company may raise the dividend rate to help restore the product to its 100 dollar target. Strategy has been accumulating cash reserves for three consecutive weeks to ensure ongoing dividend payments for stockholders. Palmer noted that while the funding engine of the preferred stock may be less efficient, it does not imply the overall business model is broken. Benchmark has reaffirmed its 570 dollar price target for Strategy. Meanwhile, shares of Strategy fell 2.8 percent on Monday to 109 dollars, marking the fifth consecutive day of losses.
