Key Takeaways:
Euro Pacific Capital CEO and longtime Bitcoin critic Peter Schiff called MicroStrategy’s STRC preferred stock “the largest Ponzi in the world,” arguing its 11.5% yield is financed by new investors in an unsustainable model that is destined to collapse. The comments were made as Bitcoin traded around $78,750 on April 22, up 4.1% over the prior 24 hours.
“You mean it’s the largest Ponzi in the world,” Schiff said on the social media platform X, responding to a post by MicroStrategy about the stock being backed by Bitcoin. He argued that investors are chasing the high yield, which is “financed by a pure Ponzi scheme,” and warned the structure could implode if new investment dries up, sending the stock to zero.
Schiff’s attack followed MicroStrategy’s announcement that it acquired 34,164 BTC for approximately $2.54 billion in the week ending April 19, funded in large part by the issuance of its STRC preferred stock. According to data from bitcointreasuries.net, the purchase brings the company’s total treasury to 815,061 BTC, making it the second-largest known holder of Bitcoin behind only Satoshi Nakamoto. The firm’s total holdings are valued at over $64 billion at current prices.
The core of the debate is MicroStrategy’s aggressive use of capital markets to acquire Bitcoin. The STRC variable-rate perpetual preferred stock is designed to trade near its $100 par value, with the company adjusting the dividend to manage demand. When the stock trades at or above par, MicroStrategy issues new shares and uses the proceeds to buy more Bitcoin, a mechanism that has allowed it to acquire roughly 77,000 BTC this year, 10 times more than all U.S. spot Bitcoin ETFs combined. Critics like Schiff see this as a high-risk loop, where the ability to pay dividends depends on a constantly appreciating Bitcoin price and unending demand for the preferred stock.
Despite the criticism, MicroStrategy founder Michael Saylor remains steadfast. He recently reiterated his belief that Bitcoin could reach $21 million per coin, compounding at 20% to 30% annually for decades as it replaces gold and becomes the world's dominant form of digital capital. Saylor’s strategy treats the company’s stock as a leveraged play on Bitcoin, a thesis that has attracted significant capital but also short interest from hedge funds, with about 11% of the company's float currently shorted.
The STRC instrument itself is a hybrid security, offering income-focused investors a high-yield product with indirect Bitcoin exposure but without the direct volatility of the underlying asset. This structure has proven popular, attracting billions in capital since its launch. However, it relies on the company's ability to continue financing its debt and dividend obligations, a task made more challenging if Bitcoin enters a prolonged bear market. To mitigate this, MicroStrategy maintains a multi-billion dollar cash reserve intended to cover payments for at least 18 months. The next key resistance for Bitcoin is watched at the $80,000 level, while support is seen near $75,000.
This article is for informational purposes only and does not constitute investment advice.
