Peter Schiff Takes Aim at STRC: This is 'Clearly a Ponzi Scheme'
Recently, well-known Bitcoin critic Peter Schiff went off on Strategy's preferred stock STRC during a livestream, unflinchingly labeling it a 'clear Ponzi scheme.' Not only that, but he openly invited Michael Saylor and others to step up and refute his claims.
He spent nearly two hours on the stream detailing his views, explaining why he believes this product will ultimately leave retail investors high and dry.
Schiff pointed out that the model relies on using funds from new investors to pay returns to old investors. He further noted that Strategy has almost no substantial income, and the little money their software business makes is nowhere near enough to cover the 11.5% annual dividend on STRC.
He argues that the operation of STRC is based on issuing new shares to fund dividends for old shareholders, then issuing more shares, creating a cycle. He questioned, 'With no income, what are they paying with? An 11.5% yield is just maintained by selling more STRC shares to fund the dividend payouts.'
It's worth noting that Strategy has been pouring significant funds into Bitcoin purchases. Just last week, the company splashed out $2.54 billion to acquire 34,164 BTC, bringing their total Bitcoin holdings to over 815,000 coins;
On April 13 alone, STRC's trading volume skyrocketed to $1.1 billion, more than four times the 300-day average volume of about $274 million, showing that STRC plays a crucial role as a funding engine for Strategy's capital flow.
Schiff noted that Strategy has no legal obligation to pay STRC dividends; payments are entirely at the company's discretion. Holders cannot compel the company to pay back, nor can they redeem shares, only sell them on the secondary market.
And once Saylor stops paying dividends, the STRC yield will vanish, demand will collapse, and the share price will eventually hit zero. Thus, Schiff concluded that this is just a 'bad check.'
Moreover, the trend in yield itself reveals issues. When STRC launched in July last year, it was at 9%, and has been raised multiple times, reaching 11.5% since April. Schiff believes this indicates weak market demand, forcing them to keep raising prices to attract new buyers.
However, some argue that Strategy itself holds a large amount of Bitcoin, and selling it could cover all shareholder returns. Schiff scoffed at this: 'By the time they actually start selling, Bitcoin prices will have already crashed.'
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