According to a report from CryptoQuant, Michael Saylor’s strategy requires him to pause his Bitcoin purchases, rebuild his cash reserves, and develop a disciplined strategy for purchasing the flagship cryptocurrency. “Strategies need to develop a systematic, fundamentals-driven approach to when to buy Bitcoin, rather than buying when capital is available,” Julio Moreno, head of research at the analytics firm, said in a report. Regarding the company’s main preferred stock, he said, “As a result of buying at the top of the cycle and accumulating during a bear market, unrealized losses rapidly expanded and STRC’s fundamentals deteriorated.” The report comes amid weeks of stock market decline, with Strategies down more than 43% in June alone. On Wednesday, the stock fell more than 9% to an intraday low of $92.28. This is the first time since 2024 that the stock price has fallen below $100. On Thursday, preferred stock STRC fell to $79.85, a record 20% below its $100 par value. Both craters continued Thursday. Strategy is down more than 4% recently after hitting a 52-week low of $86.62, while STRC is down nearly 3%. Prior to this, STRC fell to a new low of $73.62. STRC Year-to-date mountain STRC Year-to-date Moreno noted that Strategy’s US dollar cash reserves have declined 38% since the beginning of the year, while its annualized dividend liability has nearly quadrupled over the same period. As of Sunday, Strategy held $1.4 billion in U.S. dollar reserves, according to Monday’s filing, and the company, like STRC, also said it “plans to continue to replenish U.S. dollar reserves over time based on market conditions to support the credit quality of its digital credit securities.” Moreno added that the dividend coverage period, which refers to how long reserves can continue to fund dividend payments, has been reduced from more than seven years to just 14 months, and that STRC will need about $2.8 billion in cash reserves, or 24 months’ worth of coverage, to recover. Despite the decline, Strategy still holds around $50 billion of Bitcoin at current prices, which bulls argue provides a long-term buffer against liquidity stress. The company has said its capital structure is manageable even in the face of unfavorable crypto conditions, but critics are concerned that higher preferred stock dividends and upcoming debt maturities could signal increased financial pressure and future refinancing risks. “If STRC trades near or above the expected $100 level, Strategy could effectively issue new shares through its ATM program and use the proceeds to acquire additional Bitcoin,” benchmark analyst Mark Palmer said in a note on Monday. “If STRC is trading significantly below par, that mechanism will slow down, and the company’s Bitcoin acquisition activity will slow down with it. But there is a meaningful difference between claiming that Strategy’s preferred stock funding engine has become less efficient and claiming that the company’s overall model is broken, as some critics have suggested.” Although CryptoQuant’s report does not suggest an imminent liquidation for Bitcoin, Moreno stresses that the strategy has limited flexibility in how it responds to further stress. Options such as raising dividend yields or issuing more shares may send positive signals to the market in the short term, but they will not address the fundamental imbalance between cash outflows and reserve levels. “The company currently has unrealized losses totaling $10.6 billion, so its Bitcoin holdings provide limited emergency relief,” he said. “Bitcoin purchased in 2024, 2025, and 2026 are all underwater, and losses in 2026 will accelerate rapidly as the strategy continued to buy in the early stages of the bear market rather than conserve cash. Forced sales of Bitcoin at current prices would crystallize these losses on a large scale, destroying shareholder value.” Because STRC preferred stock is new, less than a year old, and the market is still figuring out how to value this type of product, “volatility is to be expected in a new product like this that is supported by an inherently volatile asset,” said Sam Callahan, director of Bitcoin strategy and research at Bitcoin treasury firm OranjeBTC. On top of that, some investors are adding leverage, which can lead to sharp moves and periodic leverage-driven events. And while Strategies should probably work on rebuilding U.S. dollar reserves, Callahan said Moreno’s idea to suspend Bitcoin purchases is not without downsides. “STRC is backed by both Bitcoin holdings and US dollar reserves,” he said. “The last trade this strategy made was an increase in USD reserves and the acquisition of 520 BTC. Both of these parts of the transaction help improve the credit quality of STRC as they increase the asset base supporting STRC.…If they have a positive view that Bitcoin will perform well over the next 5 to 10 years, buying Bitcoin in market conditions like this is very attractive.”
