Analyst Mark Palmer clarifies that Strategy's Stretch (STRC) is not comparable to Terra Luna, despite recent volatility.
Mark Palmer, an analyst at Benchmark-StoneX, has addressed concerns surrounding Strategy's Stretch (STRC), emphasizing that it should not be likened to the collapsed Terra ecosystem. Despite experiencing significant volatility, STRC is fundamentally different from the TerraUSD stablecoin, which suffered a catastrophic failure in 2022, erasing $40 billion in market capitalization.
Palmer noted that STRC, which aims to maintain a trading level around $100, does not have the capability to "depeg" like TerraUSD did. Recently, STRC traded as low as $82.53 before slightly recovering to close at approximately $88.65 on Monday, still below its par value.
Palmer highlighted the alarmist rhetoric surrounding STRC on social media, stressing that it is a dividend-generating product backed by Bitcoin assets held by Strategy, rather than a stablecoin reliant on an algorithmic structure. The firm, based in Tysons Corner, Virginia, currently holds 847,363 Bitcoin valued at around $54.5 billion.
Unlike TerraUSD, which attempted to maintain its peg through a risky mint-and-burn mechanism involving its sister token LUNA, STRC is supported by Bitcoin holdings. Palmer clarified that while STRC has faced pressure and fluctuated in price, this does not indicate a systemic flaw in Strategy's business model.
As STRC continues to trade below its intended price point, analysts speculate that Strategy may consider increasing the dividend rate to encourage a recovery towards the $100 mark. Additionally, the firm has bolstered its cash reserves to ensure ongoing dividend payments to preferred stockholders.
Despite the recent downturn, Benchmark-StoneX maintains a price target of $570 for Strategy, which remains significantly above the company's previous high of $457 reached in October. On Monday, Strategy's shares fell by 2.8% to $109, marking the fifth consecutive day of decline for the stock.
