Strategy stops bitcoin purchases and builds $3 billion reserve

Strategy (MSTR) has paused its bitcoin accumulation strategy. Since June 22, the company has made no purchases – its last acquisition was 520 BTC for about $35 million – and has instead sold off some of its holdings. Between June 30 and July 5, Strategy sold 3,588 BTC in two transactions, generating approximately $216 million. These operations bring its portfolio to 843,775 BTC and have boosted its dollar reserve to about $3 billion.

Portfolio reduction and cash increase

The sale of 1,363 BTC on June 30 was executed for $80.8 million. The next transaction, on July 5, saw the sale of 2,225 BTC for $135.2 million. Combining both sales, Strategy raised $216 million while reducing its portfolio by 3,588 BTC. Before these sales, the company held 847,363 BTC; afterward, it holds only 843,775 BTC.

These liquid funds were immediately reinvested into the dollar reserve, which reached $2.55 billion after the sales. On July 13, the reserve was increased to approximately $3 billion, thanks to an internal cash increase.

The $3 billion cash cushion

Strategy stated that the $3 billion reserve would cover more than 20 months of mandatory payments. These payments consist mainly of annual dividends on preferred shares (STRC) and debt interest. Based on a total annual amount of about $1.76 billion, the reserve provides 20.4 months of coverage.

This coverage is crucial to reassure STRC holders, who benefit from a fixed distribution rate, as well as creditors, because it guarantees that debt interest will be paid even if the price of bitcoin drops significantly. In practice, this means Strategy can continue to distribute dividends and pay its interest for more than two years without having to sell more bitcoins or raise new capital.

Bitcoin market context and four-year cycle

The price of bitcoin has experienced a sustained decline since June 22, which prompted Strategy to reassess its accumulation policy. If bitcoin follows its historical four-year cycle, a cyclical low could occur later this year, around October, although this projection remains speculative.

If the price of bitcoin were to reach new lows, the total value of Strategy's 843,775 BTC could decrease significantly. In this scenario, the $3 billion reserve, although substantial, might not be enough to cover future obligations. The company would then be forced to raise additional funds or sell more bitcoins to maintain its dividend and interest payments.

Investor reaction and criticism

Strategy's decision has drawn mixed reactions. An economist known for his skepticism toward bitcoin criticized the strategy, believing the company is unnecessarily destroying shareholder value.

Supporters of the strategy, on the other hand, argue that building a robust cash reserve is a prudent measure to protect shareholders and creditors from market volatility. By keeping a $3 billion cushion, Strategy minimizes liquidity risks and ensures continuity of distributions, even during a sharp bitcoin downturn.

Impact on STRC and MSTR securities

The STRC stock, which represents Strategy's preferred shares, is currently trading around $87, down about 0.5% on Monday. Although it has recovered from its late June low of $70, it remains below its par value of $100. This persistent discount reflects the risk premium demanded by investors to compensate for uncertainties related to bitcoin's value and the company's liquidity.

The MSTR stock, meanwhile, remains highly correlated with the price of bitcoin. Strategy's pause in bitcoin purchases may be interpreted as a cautionary signal, which could influence risk perception in the crypto market and affect MSTR's price.

Cash management and capital strategy

The decision to increase the dollar reserve is part of Strategy's broader bitcoin monetization and capital management strategy. The main goal is to strengthen the company's perceived credibility with creditors and investors, demonstrating an ability to support mandatory payments without relying solely on the bitcoin market.

This approach also gives Strategy flexibility to react quickly to unexpected market movements. If the value of bitcoin drops, the company can choose to sell assets without compromising its payment obligations, or raise funds in financial markets.

Potential consequences in case of a bitcoin crash

If the price of bitcoin were to decline drastically, the total value of Strategy's 843,775 BTC position could be substantially reduced. In such a scenario, the $3 billion reserve, although significant, might not be enough to cover dividend and interest payments over the 20.4-month period. The company would then be forced to raise additional funds, for example by issuing new preferred shares or taking out new loans, or sell more bitcoins to maintain its cash flow.

Additional bitcoin sales in a low-price environment could put further pressure on the market, potentially contributing to an additional decline in the price of bitcoin and, by extension, affecting STRC and MSTR prices. Investors should therefore closely monitor Strategy's liquidity policy, as it can influence the dynamics of the crypto market as a whole.

Impact for French investors

For French investors, Strategy is not directly accessible via a PEA, but the MSTR stock is available on CTO (ordinary securities accounts) with brokers such as Trade Republic or Degiro. The evolution of MSTR's price remains highly correlated with that of bitcoin, and this pause in purchases could signal a change in sentiment. Investors exposed to bitcoin via ETFs like the MSCI World CW8 ETF (which does not hold bitcoin) are not affected, but those holding spot bitcoin ETFs (not available in PEA) should closely follow Strategy's liquidity strategy, as it influences risk perception across the entire crypto market.