Fidelity Sees Huge Bitcoin Potential in $150 Trillion Bond Market

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Blockonomics


Key Takeaways

How a $150 Trillion Market Could Fuel Bitcoin Buying

Income-seeking investors could become a larger source of bitcoin demand as companies issue dividend-paying shares to finance purchases. In an analysis published Oct. 20, Zack Wainwright, a research analyst at Fidelity Digital Assets, examined how preferred-stock financing for bitcoin purchases could attract capital from the approximately $150 trillion global fixed-income market.

These securities are preferred equity, with no maturity date, and appeal to investors seeking dividend income. Fidelity estimates the bitcoin-focused preferred-stock segment at approximately $12 billion, illustrating its relatively small size compared with the broader income-investment market. The analysis stated:

“Even modest adoption within the vast fixed income market could materially reshape bitcoin’s supply-demand dynamics, positioning these instruments as a potentially powerful new driver of long-term value.”

Preferred-stock financing supported purchases of 135,979 bitcoin by Oct. 5, including more than 95,000 from March through May. That demand operates against bitcoin’s limited issuance. Fidelity estimates nearly 96% of the maximum supply has already been issued, with the next halving expected in less than two years.

October Offering Expands Bitcoin Treasury Financing

Strive Inc. (Nasdaq: ASST) provided a current example when it closed an offering of its 15% Series A Perpetual SATS Preferred Stock Oct. 20. The company sold 7 million shares at $90 each, generating $630 million in gross proceeds. The SATS shares carry a 15% annual dividend rate calculated on their $100 stated amount.

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The SATS financing can support bitcoin purchases, income-producing assets, working capital, and share repurchases. Regular dividend dates begin Nov. 9 and fall on business days, with payments subject to board declarations and legally available funds. The offering broadens the company’s financing options alongside its existing SATA preferred shares.

Strategy Inc. (Nasdaq: MSTR), meanwhile, reported holdings of 848,517 bitcoin after its latest acquisition in an Oct. 19 disclosure. It purchased 267 bitcoin for $22.1 million during the preceding week, using common-stock proceeds and cash. Its latest acquisition illustrates that treasury purchases can draw on several funding sources.

Dividend Costs and Market Conditions Shape Demand

Long-term economics depend on bitcoin appreciation exceeding the cost of the income paid to preferred shareholders. Fidelity cautioned that these instruments carry risks beyond those associated with money market funds. Their performance depends on both the cryptocurrency and the issuing companies.

Recent capital-management activity also shows that preferred-stock financing can move through periods of issuance and repurchases. Strategy disclosed $192.4 million in STRC repurchases Oct. 12, followed by another $193.1 million in its Oct. 19 update. Buying back outstanding shares uses capital that could otherwise serve other treasury purposes.

Its latest preferred-share capacity and liquidity figures showed approximately $17.51 billion available for STRC issuance and sales as of Oct. 18, with no STRC shares sold during the reporting week. Strategy also held a $4.83 billion reserve intended for dividends and interest, plus $447.3 million in cash for broader corporate uses.



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