Strategy Bitcoin sales may look bearish, but Grayscale says the move could reduce market stress by rebuilding the company’s dollar reserve.
Strategy’s new Bitcoin sales framework should ease worries about its financing structure and could help Bitcoin find a stronger bottom, Zach Pandl, Grayscale’s head of research, wrote in a Monday note.
As Pandl argues, the sales give investors more clarity on how the company plans to meet its obligations without putting extra pressure on preferred shareholders or relying only on stock issuance at weak valuations.
Strategy confirmed Monday that it sold about $216 million worth of Bitcoin the previous week. The sale helped lift its dollar reserves to $2.5 billion, equal to about 17 months of preferred-stock dividend cover, according to Grayscale.
And that was a sharp change from late May, when Strategy’s cash reserve had fallen to about $870 million, or roughly six months of dividend cover. Pandl said that lower reserve level left investors guessing about whether Strategy would sell shares, sell Bitcoin or create pressure for preferred shareholders.
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Strategy Bitcoin Sales Change the Risk
The Grayscale head of research said there was nothing obviously broken about Strategy’s balance sheet. The company owns about $52 billion worth of Bitcoin, compared with roughly $7 billion of debt.
And while Strategy had enough assets, investors still needed to know how it would turn those assets into cash when dividend payments came due.
Its new framework, announced in late June, gave the market an answer. Strategy said it would issue shares and sell Bitcoin as needed to maintain enough dollar reserves for its preferred-stock dividends.
Pandl argues that sales reduce tail risk around Strategy’s financing structure, which means the company is no longer leaving investors to wonder whether it will protect its cash cushion or avoid Bitcoin sales at all costs.
Grayscale’s view is that the trade-off may still be healthier for the market. A better-funded Strategy could reduce fears of a disorderly financing squeeze, while the rebound in STRC, one of Strategy’s preferred-stock instruments, suggests investors are more comfortable with the setup.
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