Fidelity Says Dividend-Seeking Capital Could Spur More Bitcoin Buying

Capital from investors seeking regular dividends could become a new driver of Bitcoin buying, according to Fidelity. The strategy involves companies issuing perpetual preferred stock with dividends and using the proceeds to purchase Bitcoin.

Jack Wainwright, a Fidelity researcher, estimated the market for Bitcoin-related perpetual preferred stock at about $12 billion in an Oct. 20 report. He wrote that even a small portion of the roughly $150 trillion global fixed-income market, including bonds, could significantly affect Bitcoin supply and demand.

Perpetual preferred stock has no maturity date and pays dividends based on issuance terms. Investors pursue dividend income, while companies use the funds they raise to buy Bitcoin. Fidelity said 135,979 Bitcoin had been purchased through this structure as of Oct. 5. More than 95,000 of those were bought between March and May alone.

Strive, a US company that holds Bitcoin, also issued perpetual preferred stock called SATS on Oct. 20, raising $630 million before expenses. The proceeds can be used to buy Bitcoin, acquire income-generating assets and fund operations.

SATS carries an annual dividend rate of 15% on a $100 per-share reference amount. The actual offering price was $90. Dividends are scheduled to be paid every business day starting Nov. 9, though payments require board approval and legally available funds.

The main question is whether gains in Bitcoin can exceed the cost of paying those dividends. If Bitcoin prices remain weak for an extended period, companies could face a heavier dividend burden and struggle to raise additional capital. Wainwright wrote that unlike money-market funds, these products carry risks tied both to Bitcoin prices and to the financial condition of the issuing companies.