- Fidelity has indicated that investments from those desiring consistent dividends could lead to increased purchasing activity in Bitcoin.
- The company estimates that the market for perpetual preferred stock linked to Bitcoin is approximately $12 billion, suggesting that inflows from the fixed-income sector could significantly influence Bitcoin’s supply and demand.
- According to Wainwright, perpetual preferred stock carries risks associated with both the price fluctuations of Bitcoin and the financial health of the companies involved.
Periodical Trend Forecast Report
According to Fidelity, funds from investors aiming for regular dividend income might serve as a new catalyst for Bitcoin purchases. This approach involves firms issuing perpetual preferred stock that pays dividends and using the revenue to buy Bitcoin.
Jack Wainwright, a researcher at Fidelity, projected the market value for Bitcoin-linked perpetual preferred stock to stand at around $12 billion in his report released on October 20. He noted that even a minor allocation from the approximately $150 trillion global fixed-income market could greatly impact Bitcoin’s supply-demand dynamics.
Perpetual preferred stocks, which do not have a set maturity date, provide dividends as per the issuance agreements. Investors are often drawn by the promise of dividend income, while the companies utilize the funds collected to invest in Bitcoin. as of October 5, Fidelity reported that this structure had facilitated the purchase of 135,979 Bitcoin, with over 95,000 acquired just between March and May.
Strive, a U.S. firm involved in Bitcoin holdings, also announced the issuance of its perpetual preferred stock, named SATS, on October 20, successfully raising $630 million before expenses. These funds can be directed toward Bitcoin acquisitions, useful asset investments, and operational financing.
The SATS has an annual dividend rate of 15% based on a $100 reference price per share, with the actual offering priced at $90. Dividends are to be disbursed on a daily basis starting November 9, subject to board approval and the availability of funds.
A key concern is whether Bitcoin’s price increases will outpace the dividend costs. Should Bitcoin values remain low for an extended timeframe, companies might find themselves facing heavier dividend obligations and encounter difficulties raising more capital. Wainwright emphasized that unlike money-market funds, these products involve risks related to Bitcoin’s price volatility as well as the issuer’s financial stability.