- At least three startups — Apyx, Buck Lab, and Saturn — have issued stablecoins backed primarily by Strategy’s “Stretch” perpetual preferred shares (11.5% dividend yield), offering holders 10–13% APY and collectively managing over $100 million in reserves
- The tokens effectively add a new layer of leverage on top of Michael Saylor’s already highly leveraged model: Strategy sells securities to buy Bitcoin, issues preferred shares paying dividends funded by more share sales, and now stablecoins are being issued against those preferreds to offer yield to crypto depositors
- A sustained Bitcoin decline would erode the value of the Stretch preferreds — and if deep enough, could cause Strategy to suspend or cancel dividends, collapsing the yield that makes the stablecoins viable; Strategy retains an explicit contractual option to cancel payouts
- Strategy holds ~$2.25 billion in cash reserves — enough to cover distributions for about two years — but critics note that preferred dividends are not guaranteed, and the stablecoins’ own websites warn holders they could lose some or all of their funds
What Happened?
Michael Saylor’s Strategy Inc. has long operated what critics call a digital credit flywheel: the company sells equity and debt to buy Bitcoin, which generates no yield, then sells more securities to keep paying investors. Now a new layer has been added. At least three crypto startups — Apyx, Buck Lab, and Saturn — have issued dollar-pegged stablecoins backed primarily by Strategy’s “Stretch” perpetual preferred shares, which pay an 11.5% annualized dividend funded by the proceeds of more share sales. Apyx is targeting a 13% APY for stablecoin holders, Buck Lab offers around 10%, and Saturn is offering above 11.5%. Together they hold over $100 million in Stretch shares as collateral. The setup means stablecoin investors are now two layers removed from Bitcoin’s price: first through Strategy’s leveraged BTC treasury, then through the preferred share structure sitting on top of it.
Why It Matters?
Stablecoins were originally conceived as a safe harbor inside crypto — assets that hold their value when everything else is volatile. Backing them with Strategy’s perpetual preferred shares contradicts that premise almost entirely. The preferred shares are a junk-bond-equivalent instrument whose dividend viability depends on Strategy’s ability to keep raising capital, which in turn depends on Bitcoin remaining at levels that justify the company’s premium valuation. A sustained Bitcoin bear market would erode the value of the preferreds as collateral, and if Bitcoin fell far enough, Strategy could invoke its contractual right to suspend dividends — cutting off the yield that makes the stablecoins attractive. The structure is also deeply concentrated: Apyx alone holds $45 million in Stretch and says it may ultimately allocate more than 70% of its reserves to it. As Hilary Allen, a law professor at American University, summarized: “This is a risky model.”
What’s Next?
Strategy’s $2.25 billion cash reserve provides roughly two years of buffer against dividend suspension even in a Bitcoin downturn — a meaningful cushion that issuers cite in their defense. And proponents argue that Stretch dividends are structurally senior to common equity distributions, meaning they must be paid before Saylor and other equity holders receive anything. But in a genuine Bitcoin bear market, the interconnected leverage across Strategy’s common stock, preferred shares, and now stablecoin products creates a potential chain of correlated failures. The stablecoin market emerged partly in response to the collapse of algorithmic stablecoins like TerraUSD in 2022. Whether this new generation of yield-bearing, preferred-share-backed stablecoins is materially safer — or simply a more sophisticated version of the same fundamental risk — is a question regulators and investors will increasingly need to answer.
Source: Bloomberg
