Bitcoin near $80,000 as institutional research highlights preferred-stock demand

Bitcoin’s retreat toward $80,000 has coincided with growing attention in institutional research to its long-term returns and emerging sources of demand. A gap remains between those assessments and portfolio allocations, while preferred-stock financing has become another channel for Bitcoin purchases.

In her broadcast on October 26, Bitcoin journalist Natalie Brunell discussed JPMorgan’s long-term return assumptions and Fidelity’s research on purchases financed through preferred shares. She said the findings reflected financial institutions’ increasing attention to Bitcoin’s investment characteristics and demand.

Bitcoin ended last week near $80,000, its lowest weekly close since September, Brunell said. That same week, JPMorgan’s baseline forecast put Bitcoin’s average annual return over the next decade at 10%, above private equity and the S&P 500 and almost twice its expected return for gold.

That assessment did not translate into an allocation in JPMorgan’s model portfolios. According to Brunell, the bank excluded Bitcoin because its data was not yet sufficiently mature. She described the distinction as an example of changing views appearing in research before reaching portfolio advice.

Preferred-stock issuance has also emerged as a source of Bitcoin demand. Fidelity’s research, as described by Brunell, found that proceeds from preferred shares sold by Strategy and others financed purchases of almost 136,000 Bitcoin. That represented more than 0.5% of Bitcoin’s maximum supply in a little over a year, with $7 billion raised between March and May alone.

Under this structure, companies issue dividend-paying preferred shares and use the proceeds to buy Bitcoin. Annual dividend rates range from 8% to 15%, depending on the product, with both fixed and adjustable payments. Investors receive income while the issuing companies acquire Bitcoin, a structure the industry calls digital credit.

For comparison, Bitcoin ETFs bought about 888,000 Bitcoin in their first year, putting preferred-stock-funded purchases at roughly 15% of that level, Brunell said. Fidelity identified the financing channel as a second measurable source of demand, while examining its risks without recommending the products.

The central condition is whether gains in the underlying asset can exceed the cost of dividend payments. Brunell said Fidelity’s analysis highlighted that requirement: Bitcoin’s appreciation must outpace the yield expense for the structure to work. She also highlighted that products absent a year earlier had already financed purchases exceeding 0.5% of Bitcoin’s maximum supply.