Strategy, the largest institutional Bitcoin holder, continues to buy Bitcoin despite the recent declines and losses.
Stragey, who continues his traditional weekly BTC purchases, is attracting market attention with his acquisitions.
At this point, a strategy expert expressed concerns about the risks associated with Strategy’s BTC purchases.
Alexander Bloom, CEO of US-based investment advisory firm Two Prime, warned that there are “no free lunches” regarding Strategy’s recent purchase of 7,000 BTC.
Bloom warned against Strategy financing its Bitcoin purchases through the issuance of perpetual preferred stock (STRC).
Stretch is a perpetual preferred stock issued by Strategy in the second half of last year to finance Bitcoin purchases. It offers an annual dividend yield of 11.5% and pays its dividends monthly in cash.
According to the data, Strategy has accumulated approximately 34,000 Bitcoin purchased through Stretch since its launch, fueling speculation that Stretch is rapidly becoming a new source of funding for Strategy.
At this point, Bloom noted that any product offering yields higher than 6% on U.S. Treasury bonds inevitably carries additional risk.
“There’s no such thing as a free lunch. Any product offering a yield higher than 6% compared to US Treasury bonds necessarily carries corresponding additional risk.”
Bloom warned the company that if confidence in Bitcoin or preferred stock were to be lost, the price could fall below its face value, leading to significant losses.
*This is not investment advice.