Is Strategy Unwinding Its Bitcoin Bet?
To a casual observer, Strategy may seem to be unwinding its Bitcoin
treasury playbook. It is selling Bitcoin, issuing stock, and accumulating dollars instead of BTC.
“The concern begins when selling bitcoin stops being a choice and becomes a recurring requirement for maintaining the capital structure,” CF Benchmarks Head of Research Gabe Selby
told The Block in July.
In recent weeks, Strategy has started selling BTC for the first time. Source: Strategy
Strategy is telling investors not to worry.
“We’re not going anywhere,” Strategy CEO Phong Le
told Bloomberg TV in July. “My objective would be the largest buyer of bitcoin for the foreseeable future.”
Strategy’s Wobbly Flywheel
The flywheel weakened as MSTR’s premium collapsed. In late June, Strategy’s mNAV—its enterprise value divided by the value of its Bitcoin holdings—
fell below 1, meaning Strategy was valued below its BTC reserve.
Meanwhile, billions of dollars of preferred
securities created recurring dividend obligations and a growing need for cash.
Strategy
formalized the shift on June 29 with its Digital Credit Capital Framework, authorizing up to $1.25 billion of Bitcoin sales to build reserves, cover payments, or repurchase securities. CEO Phong Le called it a move from “one-way capital issuance” to
active management.
By late July, Strategy had
gone five weeks without buying Bitcoin while instead building its dollar reserve and repurchasing STRC. As of Aug. 12, Strategy’s $4.65 billion in cash reserves is enough to cover roughly 2.7 years of dividend and interest obligations.
Strategy says the market impact of its Bitcoin sales has been “minimal.” Source: Strategy
Strategy still owns 840,447 BTC and says it intends to resume accumulation. But for now, new capital is increasingly going toward cash and balance-sheet support rather than more Bitcoin.
“The longer-term story hasn't changed,” Arca CIO Jeff Dorman
told the Wall Street Journal in June. “Each part of the capital structure is still in competition with other parts.”
Strategy’s two August disposals totaled 3,328 BTC, less than 0.4% of its treasury. Standard Chartered’s Geoff Kendrick has
called the earlier sales “mostly noise.”
The bigger change may be Strategy’s role in the Bitcoin market. JPMorgan
warned in July that allowing BTC sales introduces “two-way” flow risk after years in which Strategy had been one of Bitcoin’s largest sources of incremental demand.
What Would Restart the Flywheel?
A recovery in BTC and MSTR’s valuation premium would make fresh share issuance more attractive for Bitcoin purchases, while a stronger STRC and larger cash reserve would ease pressure on the balance sheet.
Citi Research analyst Peter Christiansen described the strategy as “buying more time.” The trade-off, he
warned, is weaker Bitcoin yield and mNAV in the near term.
If those weaknesses persist for longer, however, investors may have to rethink not just Strategy’s model, but the broader corporate Bitcoin-treasury playbook it helped popularize.
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