Why selling Bitcoin has become the central concern
The pressure built after weeks of growing tensions in Strategy’s preferred stock structure, according to a July 3 research note by Alex Thorn, head of firmwide research at Galaxy Digital. STRC, his top favorite stock, was expected to trade near $100 but fell to $71.25 on June 26 as bitcoin Prices fell and the company’s cash reserves dwindled.
This sharp decline has forced investors to confront a difficult and increasingly pressing question about the strategy’s next step. Would the strategy sell $BTCissue more common stock or reduce preferred dividends? Each option carried risk for a different group of investors. Sale bitcoin could harm long-term strategy $BTC history, while selling common stock could dilute holders of its publicly traded shares (ticker: MSTR).
The strategy responded with a five-part digital credit capital framework. It includes a US dollar reserve policy, a revised STRC dividend policy, $1 billion in preferred stock repurchase authorization, $1 billion in MSTR stock repurchase authorization and a $BTC monetization program. The strategy also increased STRC’s annual dividend rate from 11.5% to 12%.
Did the strategy save enough time?
The market initially appreciated this decision. MSTR rose 12.6% after the announcement, while STRC climbed 12.2%. STRC then traded near $87, still below par but well above its recent low.
Thorn called the overhaul helpful but incomplete. He wrote:
“This is a sound policy decision, but it may not solve structural problems forever. »
He added that “in a sense, Strategy’s decision on Monday is just kicking the future. But Strategy kicked it pretty far.”
This additional leeway is important because the problem was liquidityand not total assets. The strategy holds 847,363 $BTCwhich makes it one of the greatest bitcoin holders around the world. By raising more than $1 billion through the sale of common stock and establishing a 12-month minimum cash reserve policy, the company increased cash coverage to approximately 17 months.
What could strategy do instead of selling $BTC?
The biggest question now is how the strategy will use its increased flexibility. Thorn said that “the most controversial part of the ad is the ” $BTC monetization program”, because it gives the company the opportunity to sell bitcoin if necessary.
Instead, Galaxy Digital’s head of research argued that the strategy should look for other ways to raise money. “The strategy should explore revenue generation from $BTC stack without necessarily selling for cash $BTCThorn noted.
He suggested using only a small portion of the company’s assets through conservative lending or options strategies, stating:
“This could involve lending a small, separate portion of one’s bitcoin in conservative terms, or it could mean options strategies that harvest volatility while preserving most of the gains.
“These could be structured transactions that monetize part of the stack while limiting counterparty, custody and duration risks,” he added.
Why optionality could define the next step in strategy
These alternatives would not be without risk. Bitcoin loans introduce counterparty risk, while options strategies could limit some gains. However, a modest, tightly managed program could generate recurring dollar revenue while preserving most of the strategy’s bitcoin exposure.
The strategy overhaul gives the company more flexibility and appears to have eased its immediate financing concerns. Nonetheless, it faces significant senior obligations and $6.7 billion in outstanding transfers due in 2027 and 2028. Thorn concluded:
“All that being said, we believe Strategy made the wise decision to increase its optionality.”
Whether this option becomes a sustainable solution will depend on Bitcoin prices, market conditions, and the strategy’s ability to generate liquidity without weakening the long-term Bitcoin investment thesis that has defined MSTR.
