Understanding the Risks
The yields on STRC, SATA, BMNP and CHAD are high because the risks are real. This page sets them out plainly — read it alongside the projectors and charts, not instead of them.
None of this is a reason not to invest; it is the context in which an informed decision gets made.
1. Dividends are declared, not promised
Every payment requires a decision by the issuer’s board of directors. Unlike bond interest, a preferred dividend is not a contractual debt — it can be reduced, deferred, or suspended without triggering a default. All four issuers have strong commercial reasons to keep paying (their entire capital-raising model depends on it), but "strong incentive" is not the same as "guarantee". Check whether the instrument is cumulative — meaning missed payments accrue and must be settled before common shareholders receive anything — in each prospectus.
2. The dividend rate can change
STRC has a published rules-based framework (a four-band VWAP rulebook against $100 par), but management has overridden it every month since July 2026 to hold the rate flat at 12.00% rather than follow the bands mechanically — a reminder that even a "rules-based" mechanism can be discretionary in practice. SATA’s and CHAD’s reviews are monthly at the issuer’s discretion outright; all three permit downward adjustments in defined circumstances, even though rates have only moved upward so far. BMNP’s 9.50% is fixed at issue, so it has no monthly reset — but its board could still adjust it under the terms of the security. Either way, the yield you see today is not locked in for life: your income from these instruments can fall as well as rise, and a framework being "published" is no guarantee it will be followed to the letter.
3. Crypto-collateral volatility
The issuers’ balance sheets are concentrated in Bitcoin, or (for Bitmine and DeFi Development Corp.) Ethereum and Solana respectively. A deep, sustained crypto bear market would shrink the asset base supporting their capital structures, raise their cost of capital, and could pressure their ability to sustain dividends. These instruments pay cash, but their credit quality is tied to crypto markets in a way traditional preferred stock is not.
4. Price can deviate from par
Keeping the price near par is a design objective, not a guarantee — STRC, SATA and CHAD pursue it through periodic rate adjustments, while BMNP leans on a redemption premium instead. None of these is a peg, a floor, or a right for you to redeem at par. In a stressed market the price can fall well below what you paid and stay there, and if you need to sell during such a period you may realise a capital loss that outweighs the income received.
5. No maturity date
These are perpetual instruments: there is no date at which the issuer must return your stated value. Your exit is selling on the open market at the prevailing price. Total return therefore depends almost entirely on the income stream and the price at the time you choose (or need) to sell.
6. Liquidity is still developing
These are new instruments with shorter trading histories and thinner order books than established preferred stocks — CHAD, listed in September 2026, has the shortest track record of all by some distance. In calm markets, spreads are tight; in volatile periods, large orders can move the price. Limit orders are advisable, particularly for bigger positions.
7. Position in the capital structure
Preferred stock ranks below all debt. STRC sits beneath Strategy’s senior debt and STRF preferred in priority of payment; SATA benefits from Strive being debt-free but is still equity, not a deposit or a bond; BMNP and CHAD both sit above their issuer’s common stock with cumulative dividends, but are likewise equity rather than debt, and each is junior to its own company’s existing and future indebtedness. In a worst-case liquidation, preferred holders are paid only after every creditor.
8. Concentration and single-issuer risk
Each instrument is exposed to one company’s management decisions, regulatory environment, and execution. An SEC action, a leadership change, or a strategic shift at the issuer affects the instrument regardless of what the broader market is doing. Spreading across issuers reduces — but does not remove — this risk.
For the structural detail behind these points, see Strategy’s capital structure, Strive’s capital structure, and the FAQ.
Important Disclaimer
Digital Credit Yield is not a financial advisor. All content is provided for educational and research purposes only. Nothing on this site constitutes financial advice, investment advice, or a solicitation to buy or sell any financial instrument. Always consult a qualified financial adviser before making investment decisions.