Peg Stability Model

How apxUSD maintains its peg through collateral design, over-collateralization, and cross-market arbitrage

Apyx maintains apxUSD’s peg stability through a combination of (1) the price stabilization characteristics of the preferreds as collateral, (2) an overcollateralized issuance framework for apxUSD itself, (3) cash & treasuries buffer within the capital basket (4) cross-market arbitrage incentives in secondary markets.

Price Stabilization Mechanism of STRC as Collateral

At the current stage, apxUSD primarily uses STRC as its core collateral asset. STRC is Strategy’s variable rate, non-convertible perpetual preferred equity, structured around a $100 stated amount per share, with dividends determined and paid on a monthly basis.

Importantly, STRC is not a legally fixed peg instrument. Instead, it is designed with an embedded economic mechanism intended to encourage trading near its reference value. Strategy retains discretion to review and adjust the dividend rate each month with the stated objective of keeping STRC trading around its $100 par or stated value and reducing price volatility.

The intuition behind this mechanism is straightforward:

• When STRC trades at a discount to its reference value, an upward adjustment to the dividend rate can raise yield relative to price, supporting demand and improving price recovery.

• When STRC trades at a premium, a downward adjustment can reduce excess yield incentives and help moderate price deviations.

Rather than enforcing a hard peg, STRC relies on dividend policy as a market-based lever to guide trading behavior toward a reference price range. apxUSD is designed on top of this collateral profile and explicitly accounts for STRC’s stabilization characteristics.

Overcollateralized Issuance Framework of apxUSD

While STRC provides a degree of inherent price stabilization, apxUSD adds an additional layer of protection through an explicit over-collateralization requirement. The total amount of apxUSD minted is constrained by the market value of the collateral, ensuring collateral value exceeds outstanding liabilities by a defined margin. The collateral buffer is increased via yield spreads between collateral yield received by the protocol and yield paid out to apyUSD holders, as well as any price appreciation in the collateral assets.

The over-collateralization structure serves two complementary purposes:

• A first line of defense, where the collateral itself is designed to limit extreme price deviations through an adaptive dividend policy.

• A second line of defense, where conservative issuance limits create a buffer against adverse price movements, liquidity shocks, or temporary dislocations in the collateral market.

As a result, apxUSD does not rely solely on the preferred share stabilization characteristics. Instead, it embeds a margin of safety designed to preserve backing integrity even under stressed market conditions.

Cash & Treasuries Buffer

Potentially the strongest volatility hedge is the cash and treasuries buffer. With the preferreds generating strong yield, a portion of the collateral can be held in treasuries to reduce volatility, without meaningfully reducing the overall yield of the collateral base.

Cross-Market Arbitrage

While the overcollateralization framework governs the soundness of apxUSD issuance and redemption, deviations from the one-dollar reference price in secondary markets are addressed through arbitrage incentives executed by eligible whitelist participants.

• When apxUSD Trades Above $1.00 (Premium): Eligible participants may use the protocol’s minting pathway to mint apxUSD under predefined terms and sell it into external markets where apxUSD is trading at a premium. This increases circulating supply and applies downward pressure on the market price, encouraging convergence toward the reference level.

• When apxUSD Trades Below $1.00 (Discount):

  Eligible participants may acquire apxUSD at a discount in secondary markets and redeem it through the protocol for dollar-equivalent value. This reduces circulating supply while increasing buy-side demand, supporting price recovery toward the reference level.

These arbitrage dynamics align trading incentives with peg stability, helping apxUSD trade near its reference value across a range of venues.