‘Stretch’ buying frenzy… US advisory firm warns: “There’s no free lunch”

Strategy, the world’s largest corporate holder of Bitcoin (BTC), is said to have bought as many as 7,000 bitcoins so far this week alone through its perpetual preferred shares, Stretch. Concerns are also being raised about the risks associated with Stretch.

CoinDesk reported on the 11th (local time) that Strategy is estimated to have purchased about 700 bitcoins this week using Stretch. Stretch is a perpetual preferred share that Strategy issued in the second half of last year to raise funds for bitcoin purchases. The annual dividend rate is 11.5%, and dividends are paid in cash monthly.

The view is that Stretch is quickly establishing itself as a new funding source for Strategy. CoinDesk said, “Since the launch of Stretch, the cumulative number of bitcoins purchased through the product amounts to about 34,000,” adding that “corporate interest is also gradually increasing, with US asset manager Strive recently investing $50 million in Stretch.”

Some are also pointing to the risks of Stretch. Alexander Blume, CEO of US investment advisory Two Prime, told CoinDesk, “There’s no free lunch,” adding, “If a product offers a yield more than 6% higher than US Treasuries, there must be additional risk commensurate with that.”

There are also criticisms that purchases of Stretch have been concentrated among a handful of companies. CEO Blume said, “We are seeing moves by a few companies to buy Stretch,” while adding, “For now, in some cases they appear to be symbolic or partnership-type transactions.”