According to Julio Moreno, head of research at CryptoQuant, Strategy should adopt a more disciplined approach to bitcoin purchases rather than buying whenever capital is available. The report highlights that the company's preferred stock, STRC, has seen a dramatic decline, dropping over 43% in June and hitting an intraday low of $92.28, marking the first time it fell below $100 since 2024.
STRC also fell to a record low of $79.85, 20% below its par value. Strategy's cash reserves have decreased by 38% this year, while its dividend obligations have quadrupled, leading to a reduction in dividend coverage from over seven years to just 14 months. The company currently holds $1.4 billion in cash reserves but needs approximately $2.8 billion to stabilize its financial position.
Despite holding about $50 billion in bitcoin, which some investors view as a long-term buffer, the company faces pressure from higher dividend payments and upcoming debt repayments. Analysts like Mark Palmer from Benchmark noted that when STRC trades below its intended level, the efficiency of issuing new shares to acquire more bitcoin diminishes.
Moreno cautioned that any forced sale of bitcoin at current prices would realize significant losses, further harming shareholder value. The volatility of STRC, being a new instrument, is compounded by the inherent volatility of bitcoin itself, making the market's valuation uncertain.
While some analysts suggest that pausing bitcoin purchases could be beneficial, others argue that maintaining a balanced approach between cash reserves and bitcoin acquisitions is crucial for the company's credit quality