STRF: A High-Yield, Bitcoin-Backed Preferred Stock and Its Strategic Attraction in Today's Low-Rate Environment

In a world where traditional fixed-income yields remain stubbornly low, investors are increasingly turning to unconventional instruments to meet their return objectives. The 10.00% Series A Perpetual Strife Preferred Stock (STRF), issued by Strategy (formerly MicroStrategy), has emerged as a compelling case study in this search for yield. Backed by Bitcoin and structured as a perpetual preferred security, STRF offers a 10% annual dividend, currently yielding 8.91% as of August 2025, while leveraging a unique carry trade-like model tied to the volatility and growth of the world’s largest cryptocurrency [1]. This article examines STRF’s strategic appeal through the lens of comparative carry trade value and systemic risk, contextualizing its role in today’s capital markets.

The Carry Trade Logic of STRF

STRF’s structure diverges sharply from traditional fixed-income instruments. Unlike corporate bonds, which require repayment of principal and often offer yields below 5.2% for investment-grade issues [1], STRF is a perpetual preferred stock with no maturity date. Its 10% annual dividend, paid quarterly, is funded by Strategy’s Bitcoin treasury, which has grown to over 592,100 BTC as of June 2025 [4]. The company uses proceeds from its at-the-market (ATM) program—raising $163.1 million in Q2 2025 alone—to acquire more Bitcoin, creating a self-reinforcing cycle of collateral growth and dividend sustainability [3].

This model mirrors a carry trade, where investors borrow at low rates to invest in higher-yielding assets. For STRF, the “borrowing” is implicit: Strategy issues preferred shares at a premium to par ($118.55 as of August 2025) and uses the proceeds to purchase Bitcoin, which is then over-collateralized at a 6× cover ratio to back dividend obligations [2]. The result is a yield-enhancing structure that aligns with Bitcoin’s long-term appreciation potential while offering investors a fixed return. In a low-rate environment where U.S. Treasury yields have fallen to 4.26% by late August 2025 [3], STRF’s 8.91% yield represents a significant premium, particularly for risk-tolerant investors seeking alternatives to traditional bonds.

Systemic Risks: Volatility, Regulation, and Collateral Stability

The primary risks associated with STRF stem from its Bitcoin collateralization. Bitcoin’s price in 2025 has been marked by extreme swings, including a peak near $109,000 in January 2025 followed by a correction to the high $70,000 range by April [1]. While the 6× cover ratio provides a buffer, a sustained decline in Bitcoin’s price could erode this cushion, potentially threatening dividend payments. JPMorgan analysts have noted that Bitcoin’s current price may be undervalued at around $126,000 by year-end, but this optimism hinges on falling volatility and continued institutional adoption [5].

Regulatory clarity has improved, with the U.S. Senate passing the Genius Act in July 2025 to establish a federal framework for payment stablecoins [3]. However, broader crypto regulations remain fragmented, and any adverse policy shifts could impact Bitcoin’s value and, by extension, STRF’s collateral. Additionally, Strategy’s ability to sustain dividend payments depends on its capacity to raise capital through the ATM program. If market conditions deteriorate—say, due to a broader economic slowdown or a Bitcoin bear market—the company may struggle to maintain its dividend, creating a “fragile lattice” of leverage [1].

Comparative Value and Strategic Positioning

STRF’s yield of 8.91% far exceeds the 4.75–6.5% range of the Bloomberg US Corporate Bond Index and the 4.35% yield of U.S. Treasuries [1]. Even preferred securities, which typically offer higher yields than bonds, lag behind STRF’s returns. However, this comes with trade-offs. Preferred stocks carry risks of income deferral and lower credit protection, while STRF’s Bitcoin collateral introduces asset-specific volatility [4]. For investors who view Bitcoin as a long-term store of value and accept its price swings as a cost of entry, STRF offers a unique hybrid: a high-yield security with downside protection from over-collateralization and upside potential from Bitcoin’s appreciation.

Conclusion

STRF represents a bold experiment in capital structure, blending the yield-seeking appeal of preferred stocks with the growth potential of Bitcoin. Its carry trade-like model—leveraging perpetual capital raises and Bitcoin’s appreciation—offers a compelling case in a low-rate world. Yet, the risks are non-trivial: Bitcoin’s volatility, regulatory uncertainties, and the company’s reliance on continuous fundraising create a fragile ecosystem. For investors with a high risk tolerance and a conviction in Bitcoin’s long-term trajectory, STRF could serve as a strategic allocation. However, those prioritizing stability may find traditional corporate bonds or preferred securities more aligned with their risk profiles.

Source:
[1] Preferred Securities: Balancing Yield with Risk [https://www.schwab.com/learn/story/preferred-securities-balancing-yield-with-risk]
[2] Convertible Notes vs. Bitcoin-Backed Preferred Stock [https://www.ccn.com/education/crypto/strategy-bitcoin-preferred-shares-vs-convertible-notes-move-explained]
[3] Weekly fixed income commentary | 08/25/2025 [https://www.nuveen.com/en-us/insights/investment-outlook/fixed-income-weekly-commentary]
[4] Blockchain and Digital Assets News and Trends – July 2025 [https://www.dlapiper.com/en/insights/publications/blockchain-and-digital-assets-news-and-trends/2025/blockchain-and-digital-assets-news-and-trends-july-2025]
[5] JPMorgan says current bitcoin price 'too low,' sees upside to $126,000 by year-end [https://www.theblock.co/post/368653/jpmorgan-says-current-bitcoin-price-too-low-sees-upside-to-126000-by-year-end]