Bitcoin Digital Credit Market Grows to $16 Billion

The Bitcoin digital credit market has grown to an estimated $16 billion in just two years, according to Dan Hillery of UXTO. This growth is largely driven by Strategy's flagship product, STRC, which pays a 12% annualized dividend in cash twice a month.

STRC is a perpetual preferred security with a $100 stated amount and is not collateralized by Strategy's Bitcoin holdings. Instead, it carries a preferred claim on the company's residual assets. The issuer uses the money raised to buy more Bitcoin, which can be used to fund dividends and interest on debt.

The dividend rate for STRC is set monthly by the board, with the aim of keeping the shares near their $100 stated amount. In June, the rate was increased from 9% to 12%, but it is not tied to an automatic price formula. Management considers a range of factors, including market yields and reserve coverage.