Overview
- Strategy has begun liquidating Bitcoin to fund dividends on its preferred shares, deviating from its previous "never sell" policy, creating uncertainty in the market.
- Standard Chartered characterizes this selling as "mostly noise" and a communication issue, reaffirming its Bitcoin price prediction of $100,000 by the end of 2026.
- Currently, Bitcoin is trading at approximately $64,440, reflecting a 3.8% weekly increase but a 42% decline year-over-year, while traders estimate a low likelihood of Strategy retaining 1 million BTC this year.
Strategy's recent decision to sell Bitcoin to finance dividends on preferred shares has created uncertainty regarding Bitcoin's short-term outlook, as indicated in a recent note from Standard Chartered. Nonetheless, the bank advises investors to remain focused on the bigger picture.
Last week, Strategy sold 3,588 BTC for around $216 million between June 29 and July 5 to cover preferred-share dividends and bolster its cash reserves, now holding 843,775 BTC. This follows a minimal sale of 32 BTC in early June, which caused the company to experience its worst week since 2022.
In a note released on Friday, Geoff Kendrick from Standard Chartered described these sales as "mostly noise" rather than a clear indicator of Bitcoin's medium-term trajectory, maintaining the firm's $100,000 price forecast for Bitcoin by the end of 2026.
Issues with Strategy’s mNAV
For years, Strategy operated a straightforward model: as long as its shares traded significantly above the value of its Bitcoin assets, measured by a metric called mNAV, it could issue stock, purchase more BTC, and enhance both its valuation and Bitcoin's market price. However, that premium has dissipated.
Standard Chartered estimates the mNAV at approximately 1 based on enterprise value, while equity-based measures indicate a lower value: according to BitcoinTreasuries, the stock is valued at about 0.7 times the worth of its Bitcoin holdings on a diluted basis, representing a roughly one-third discount. Regardless, this model has stalled. The BTC accumulated by Strategy, originally purchased for $63.7 billion, is now valued at about $54 billion, leading the firm to report an $8.3 billion loss on its digital assets last quarter, primarily unrealized losses.
Funding the STRC Dividend
With the previous accumulation strategy hindered, Strategy is now utilizing its Bitcoin as collateral for STRC, a perpetual preferred stock known as "Stretch" that offers a 12% annual dividend and has approximately $10 billion in circulation, according to Standard Chartered.
The shares are intended to trade close to their $100 par value, but they fell to an intraday low of $71.25 on June 26 following the company's announcement of its initial Bitcoin sale earlier that month. Subsequent price movements suggest "the market has yet to be fully convinced of this pivot," Kendrick noted. Through a "BTC Monetization Program" introduced on June 29, Strategy has the potential to generate up to $1.25 billion by selling Bitcoin to support dividend payments.
Kendrick emphasized that effective communication is vital for reassuring the market that extensive selling is unlikely, which could help bring STRC back towards its $100 par value and alleviate pressure on Bitcoin. Since the stock is "heavily over-collateralized" by the Bitcoin backing it, he suggested that proper signaling could eliminate the necessity for Strategy to sell more. He highlighted that the reserve supporting the dividend currently stands at $2.55 billion, nearly sufficient to cover dividends for the next 18 months.
Market Sentiment
As of Friday, Bitcoin was trading around $64,440, up 3.8% for the week but down 42% over the past year and about 49% below its October 2025 peak of $126,080, according to CoinGecko data.
Market participants are skeptical that Strategy will resume its aggressive buying strategy anytime soon. A prediction market on Myriad, which is owned by Decrypt's parent company Dastan, estimates the likelihood of the company holding over 1 million BTC before 2027 at approximately 13%. Currently, Strategy holds 843,775 BTC, accounting for more than 4% of all Bitcoin that will ever be mined.