Analyst calls for Strategy (MSTR.US) to pause its Bitcoin holdings and prioritize rebuilding its cash reserves.

Julio Moreno, research director at CryptoQuant, stated that if Michael Saylor's Bitcoin acquisition platform Strategy (MSTR.US) wants to restore market confidence in its stock, it should stop buying the cryptocurrency. In a research report, Moreno pointed out that Strategy's top priority should be rebuilding its US dollar cash buffer, rather than continuing to buy Bitcoin when capital is available. The company needs to take a more systematic, fundamentals-based approach to timing their Bitcoin purchases. "Buying at the top of the cycle and continuing to accumulate in a bear market has rapidly expanded unrealized losses and deteriorated STRC fundamentals," Moreno said. Strategy is under pressure, as months of Bitcoin selling have raised concerns about its debt repayment ability. Its STRC preferred shares fell to $82.50 last week, a 17.5% discount to their $100 face value, setting a record low; the discount rate was still close to 13% at Tuesday's close. Its common stock MSTR also fell to its lowest level since May 2024, highlighting investor concerns about its financing model. For Strategy's model to remain viable, the rate of Bitcoin appreciation needs to be faster than the compound growth of the company's debt. Currently, the company's unrealized losses on total holdings amount to $11 billion. Strategy pays an annualized yield of 11.5% on STRC, reset monthly and has been raised several times since issuance to attract capital for buying Bitcoin. According to its official website data, the actual yield based on the current discount price of STRC is 13.17%. Strategy has no obligation to sell Bitcoin to support the price of STRC, and could transmit the ability to sustain dividend payments by raising the dividend yield or issuing common stock these tools are already in deployment. However, these measures do not address the underlying issue of weakening cash coverage and rising debt burden. Moreno pointed out that the Bitcoin bear market adjustment coincided with Strategy's cash reserves being "simultaneously depleted." He added that after Strategy repurchased $1.5 billion of zero-coupon convertible preferred notes due in 2029 in May, the pressure further intensified, "severely weakening" the cash buffer available to support STRC dividends. Moreno believes that the path to returning to face value "is not smooth." He stated that Strategy's US dollar cash reserves have declined by 36% since early 2026 to $1.4 billion. Rebuilding cash reserves to around $2.8 billion (equivalent to 24 months of dividend coverage) is a "necessary condition" for STRC's recovery. Strategy (formerly MicroStrategy) has established one of the largest corporate Bitcoin holdings in the world. As demand from other large Bitcoin buyers, including US exchange-traded funds (ETFs), weakens, the market increasingly relies on Strategy's purchasing power. However, in early June, the company disclosed that it had sold 32 Bitcoins, marking the first reduction since 2022. Though insignificant compared to the holding size of about $57 billion, this sale was symbolic as it shook Saylor's narrative of "never selling." Subsequently, the company continued to increase its Bitcoin holdings. According to a filing on Monday, Strategy purchased $34.9 million worth of cryptocurrency from June 15 to 21, with the funding entirely raised through the sale of Class A common stock, marking the third consecutive week that the company relied on common stock financing despite previous commitments to switch to perpetual preferred shares as a financing tool. Strategy also increased its reserves by $300 million using the related earnings.