Ripple CEO Brad Garlinghouse recently made waves with a pointed critique of Strategy and its STRC preferred shares, highlighting the risks in the way Michael Saylor has financed Bitcoin acquisitions. While Garlinghouse reaffirmed his optimism around Bitcoin itself, he argued that the financing model relying on issuing preferred shares could be destabilizing for the broader crypto market.
The focus turns to the STRC model
In an interview with CNBC, Garlinghouse emphasized that financial engineering does not create lasting value, asserting that durable worth in digital assets depends on real-world utility. As the leader of the company behind the XRP ecosystem, Garlinghouse accused Michael Saylor’s team of having misplaced priorities, insisting that their strategy has created negative spillover effects for the entire sector.
Garlinghouse insisted that long-term value in digital assets stems from genuine use cases, not financial engineering.
Despite calling out Strategy’s approach, Garlinghouse made clear that his criticisms did not target Bitcoin itself. His concerns zeroed in on the funding mechanism Strategy has increasingly used over the past year to purchase more Bitcoin, rather than on the cryptocurrency directly.
The financing model involves issuing preferred shares with a fixed dividend obligation. STRC, the preferred share in question, comes with an annual dividend yield of 11.5 percent and an official target price of around $100. Recently, however, STRC plummeted about 25 percent from its target, hitting a record low.
Mini glossary: Preferred shares are a class of stock that typically offer fixed dividends and confer different rights from common stock. They allow companies to raise capital without traditional debt, but if the price drops below a key threshold, their appeal in new issuances may be significantly diminished.
| Indicator | Data |
|---|---|
| STRC annual dividend | 11.5 percent |
| Target price | 100 dollars |
| Latest plunge | About 25 percent |
| Bitcoin price | Below 59,000 dollars |
Market pressure intensifies amid Bitcoin downturn
On Thursday, STRC shares traded at 26 percent below their nominal value, with Strategy’s common stock falling to its lowest point since February 2024 before closing Friday around $82. At the same time, the price of Bitcoin retreated below the critical $59,000 threshold, amplifying the sense of volatility across crypto assets.
A recent report by CryptoQuant argued that Strategy may soon need to pause Bitcoin purchases and focus on rebuilding its cash reserves. The institution calculated that the buffer supporting STRC dividends has shrunk from over seven years’ worth of coverage to just 14 months. When STRC drops below $100, the preferred share mechanism for funding Bitcoin acquisitions also loses momentum.
CryptoQuant underscored that the financial buffer backing STRC dividends has dwindled from more than seven years to just 14 months.
Mixed analyst reactions to the model’s outlook
Analyst Mark Palmer of Benchmark and StoneX offered a more measured perspective, arguing that the model has not entirely broken down but now yields significantly lower returns. He cautioned against equating STRC with assets that have experienced a complete collapse.
The debate has reignited concerns about the sustainability of capital market-driven models for financing Bitcoin purchases. Periods of heightened price pressure raise the risk that such frameworks could intensify volatility not only in underlying company shares but throughout the crypto market ecosystem.
