Over the past several weeks, Bitcoin and other digital assets have faced renewed volatility and downside pressure. Today is no exception: Bitcoin has slipped below $100,000 as tech stocks trade sharply lower, unwinding a portion of their strong gains from recent months.
As always, we encourage subscribers to respond to market turbulence cautiously—but also opportunistically. With crypto as an asset class under pressure, we are seeing various pockets of opportunity emerge.
In traditional markets, declining prices tend to attract value-oriented buyers. That demand often prevents prices from falling too far. But in crypto, buyers with that mentality are largely absent.
Despite steadily rising yields as prices have fallen, value-oriented investors have not gravitated toward the preferred stock securities issued earlier this year by Strategy (common stock ticker: MSTR), the Bitcoin Treasury Company founded by Michael Saylor.
For investors seeking high income and long-term Bitcoin upside potential, we view this as an opportune moment to revisit Strategy’s preferred stock offerings.
In this report, we lay out our updated thinking—especially in light of Strategy’s recent guidance on the tax treatment of its preferred dividends.
Strategy has informed investors that preferred dividends will be treated as Return of Capital (ROC) rather than ordinary dividends. ROC distributions are not taxable when received; instead, they reduce an investor’s cost basis, with taxes deferred until the shares are sold.
In March 2025, we profiled Strategy’s first preferred stock security—the 8% Perpetual “Strike” Preferred (STRK)—shortly after it was brought to market (High Yield with Bitcoin Upside).
STRK remains the only preferred instrument that can be converted into MSTR common stock.
With MSTR shares trading poorly, the conversion option is currently far “out of the money,” meaning the vast majority of the value of the shares resides in the expectation of future dividends. But the right to convert one STRK share into 0.1 MSTR shares is perpetual, meaning it never expires.
Bitcoin may be under some pressure right now, but to the extent it continues to appreciate at high rates in future years, the conversion option that comes with STRK could conceivably become “in the money” within a reasonable investment time horizon.
Setting aside the convertibility, the dividend yield on STRK now sits just under 10%. Meanwhile, the ROC treatment materially enhances the after-tax attractiveness of the shares—particularly for investors in taxable accounts.
Conflicting mindsets
Value investors are the bargain hunters of the capital markets. They are always on the prowl for irresistibly low-priced investments, like a thrifty shopper roaming the aisles of a supermarket and grabbing whatever happens to be marked down.
Crypto investors are a different breed entirely. A typical value investor might call a crypto investor a “speculator”—and mean it as an insult. The crypto investor, in turn, might wear the label as a badge of honor.
Someday, the worlds of value and crypto investing may converge. Today, they remain far apart—and that distance has real consequences for how markets behave….
To continue reading Finding Opportunity Amid Crypto Turbulence and access our current views on where we see opportunity across the crypto landscape, subscribe now to the 76report.
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