Fidelity Digital Assets says perpetual preferred stock has financed purchases of 135,979 Bitcoin, making the funding model used by treasury companies another source of demand for the cryptocurrency.
Summary
- Preferred-stock issuance financed 135,979 BTC in purchases through Oct. 5, Fidelity said.
- The funding model depends on Bitcoin’s gains exceeding the cost of dividend payments.
- Preferred shareholders face issuer, liquidity and interest-rate risks alongside Bitcoin exposure.
An Oct. 20 report by research analyst Zack Wainwright said the purchases represented more than 0.5% of Bitcoin’s maximum supply as of Oct. 5. The report names Strategy and draws on filings from Strive.
Companies issue dividend-paying preferred shares and use the proceeds to buy Bitcoin. Fidelity links the approach to an investment thesis that Bitcoin’s limited supply could help preserve purchasing power as fiat currencies lose value.
The report also makes the model’s central assumption explicit.
“For issuers, the strategy only works if the appreciation of the underlying asset outpaces the cost of yield.”
Preferred issuance financed more than 95,000 BTC in purchases between March and May, raising over $7 billion. Fidelity compared that demand with the 888,185 BTC accumulated by spot Bitcoin exchange-traded products in their first year.
Preferred shareholders face a different set of risks from investors holding Bitcoin directly. Fidelity’s separate investor guidance explains that preferred securities combine characteristics of stocks and debt, with terms that vary by offering.
Perpetual securities have no scheduled maturity, while some preferred offerings allow issuers to suspend or defer payments. Holders generally rank ahead of common shareholders but below bondholders if the company fails.
Fidelity’s guidance also identifies inflation risk for preferred shareholders because rising prices can reduce the purchasing power of future dividend payments. Higher market interest rates typically push existing preferred-security prices lower, and limited trading liquidity can force investors to sell below face value.
The Bitcoin report consequently ties the preferred-stock model’s success to both the cryptocurrency’s long-term performance and the financial condition of the companies issuing the shares.
