Summary
- Julio Moreno, an analyst from CryptoQuant, recommends that Strategy halt its Bitcoin acquisitions and concentrate on increasing cash reserves.
- He noted that the company's dwindling cash is exacerbating the decline of Stretch (STRC), which reached an all-time low on Wednesday.
- Moreno suggested rebuilding the USD Reserve to ensure at least 24 months of dividend coverage for the company.
Soaring expenses related to Strategy's primary preferred stock have put the Bitcoin-investing firm in a difficult situation, and CryptoQuant has identified a clear path forward.
According to Julio Moreno, the Head of Research at CryptoQuant, the leading corporate Bitcoin holder must stop buying Bitcoin immediately and redirect efforts toward enhancing cash reserves to alleviate the pressure on Stretch (STRC).
On Wednesday, the preferred stock offering an annual dividend of 11.5% fell to a historic low of $79.85, as reported by Yahoo Finance. Concurrently, Bitcoin dropped 4% within 24 hours, hitting a low of $59,175 before recovering slightly to $59,632, per data from CoinGecko data.
In the last month, STRC has struggled to maintain its trading value at or above the $100 par, raising doubts about the company’s vision for “digital credit.” As investor confidence has waned, the sustainability of the preferred stock has come under increased scrutiny, according to Moreno.
Experts predict that Strategy may increase the STRC dividend for the eighth time in an attempt to lift its price back to the intended trading level; however, Moreno contended that the firm's insufficient cash reserves could hinder this recovery.
This sentiment aligns with a note from JPMorgan earlier this month, which pointed out that Strategy's future seems increasingly tied to the strength of the dollar. At that time, the company began accumulating cash for three consecutive weeks, although Moreno believes this is still insufficient.
At the beginning of the year, the firm allocated $2.2 billion for debt management and dividend payments, but this buffer has diminished significantly as the company opted to repurchase part of its convertible debt a few weeks ago.
“As cash reserves diminished while dividend obligations increased, STRC’s dividend coverage plummeted from over 7 years at the start of 2026 to merely 14 months today,” Moreno noted. “A larger cash reserve is the most straightforward indicator the market needs to restore confidence in STRC.”
From Moreno's viewpoint, Strategy should aim to build cash reserves that can sustain the company for 24 months. Additionally, the company ought to create a systematic approach for timing purchases and for selling Bitcoin in a more controlled manner.
This month, investor anxiety surged when the company revealed it sold 32 Bitcoin for $2.5 million. While the sale was minor relative to its total holdings and was previously communicated, it nonetheless sparked concerns about Strategy's capacity to support the Bitcoin market.
Since early 2026, Strategy’s dividend obligations have surged nearly fourfold to an annualized $1.2 billion. Moreno characterized these escalating costs as a “structural liability” that could further intensify the existing pressure on the preferred stock.
This cautious atmosphere has coincided with a decline in the firm’s common shares, which dropped over 10% to a 27-month low of $92.28, representing a staggering 80% decrease from a multi-year high of $457.22 last year.
STRC has facilitated significant Bitcoin accumulation for Strategy this year. When the stock trades at or above $100, the company issues additional shares to acquire more Bitcoin. Since its launch less than a year ago, Strategy has issued over $10 billion of this product.
Moreno expressed that Strategy is in a challenging position. If the Bitcoin-buying firm opts to further reduce its holdings to bolster cash for dividend payments, such sales would crystallize unrealized losses on its balance sheet and “diminish shareholder value.”
This week, the Tysons Corner, Virginia-based company indicated it currently holds 847,363 Bitcoin. With the recent decline in Bitcoin's value, the worth of its holdings has dropped to $50 billion, placing the total value approximately $13 billion in the red.