Benchmark: Strategy’s STRC Not a Stablecoin Like Terra
Benchmark analyst Mark Palmer rebuts social media claims that Strategy's preferred stock STRC is akin to a depegging stablecoin. He emphasizes STRC's backing by Bitcoin holdings and its role in Strategy's funding engine, which remains intact despite recent price weakness.
Quick Take
STRC fell to $82.53, sparking Terra-like depeg comparisons.
Palmer: STRC is not a stablecoin; it's backed by Bitcoin, not algorithms.
Strategy's Bitcoin purchases may slow, but model isn't broken.
Benchmark reaffirms $570 price target for Strategy shares.
Market Impact Analysis
NeutralSTRC weakness could temporarily curb Bitcoin purchases, but limited direct crypto market impact as analyst dismisses structural parallels to Terra.
Speculation Analysis
Key Takeaways
- Strategy's STRC is not a stablecoin—it cannot "depeg" like TerraUSD. It is backed by $54.5 billion in Bitcoin, not algorithmic arbitrage.
- STRC fell to $82.53 last week, sparking social media panic, but recovered to $88.65, still 11.3% below its $100 par value.
- Strategy holds 847,363 BTC, providing a hard asset floor that Terra's model lacked.
- Benchmark analyst Mark Palmer calls the Terra comparison "fundamentally misguided" and maintains a $570 price target on Strategy shares.
What Happened
Benchmark analyst Mark Palmer issued a forceful rebuttal to social media chatter claiming Strategy's preferred stock, STRC, was undergoing a Terra-like "depeg." The stock had sunk to $82.53, more than 17% below its $100 par value, prompting alarmist tweets. Palmer stressed that STRC is not a stablecoin and has no peg to defend. Instead, it is a dividend-paying equity instrument indirectly backed by Strategy's massive Bitcoin hoard. The company now holds 847,363 BTC worth $54.5 billion. Unlike Terra's algorithmic UST, STRC's value is not sustained by mint-and-burn mechanics with a sister token. Palmer called the comparison "fundamentally misguided," noting that STRC's price fluctuations are cyclical and tied to market demand, not protocol confidence. The stock recovered to $88.65 but remains below par, potentially slowing Strategy's share issuance for new Bitcoin buys.
The Numbers
STRC closed Monday at $88.65, an 11.3% discount to its $100 liquidation preference. It touched a low of $82.53 last week. Strategy's Bitcoin treasury of 847,363 BTC is worth $54.5 billion at current prices near $64,400. Terra's 2022 implosion destroyed $40 billion in market value across UST and LUNA. Strategy's common shares slipped 2.8% to $109, while Benchmark's price target sits at $570—a potential 420% upside. The preferred stock's 11.5% annual dividend offers investors a cushion, but the price weakness has persisted for weeks.
Why It Happened
The STRC sell-off triggered painful memories of Terra's collapse. When UST lost its dollar peg in May 2022, the resulting death spiral wiped out $40 billion in a matter of days. Social media influencers seized on STRC's slide below $90, dubbing it a "depeg." Palmer countered that STRC lacks the core features of a stablecoin. It has no algorithmic arbitrage mechanism, no reflexive token dependency, and no promise of stability. Its price is driven by supply and demand, and when it trades above $100, Strategy issues more shares to buy Bitcoin. The dividend provides a floor, but the product's cyclical nature means dips below par are not unusual. The broader crypto market's recent weakness likely amplified the move.
Broader Impact
The episode underscores the market's lingering trauma from Terra's $40 billion wipeout. Any hint of instability in a crypto-adjacent funding instrument draws instant comparisons. For Strategy, maintaining confidence in STRC is critical: a sustained discount hampers its ability to raise capital for Bitcoin acquisitions. Palmer's defense may calm nerves, but the price action shows that Bitcoin-proxy products are not immune to panic. If STRC fails to recover above par, Strategy might need to boost its dividend or offer other sweeteners to attract buyers.
What to Watch Next
- Whether STRC reclaims the $100 level, enabling Strategy to issue new shares and resume aggressive Bitcoin purchases.
- A potential dividend increase by Strategy to make the preferred stock more attractive while it trades below par.
- Bitcoin's price trajectory—a sustained drop would pressure both STRC and Strategy's common equity, testing Benchmark's $570 thesis.
This article is for informational purposes only and does not constitute financial advice.
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