CryptoQuant Tells MicroStrategy to Halt Bitcoin Purchases Amid Balance Sheet Concerns

MicroStrategy's aggressive Bitcoin acquisition strategy is being called into question by CryptoQuant. The company, formerly known as MicroStrategy, has been buying up large quantities of Bitcoin since 2024, but its cash reserves have taken a hit, dropping by 38% this year.

The issue lies in the company's dividend obligations, which have quadrupled to $1.2 billion annually due to the issuance of STRC perpetual preferred stock. This has put pressure on Strategy's balance sheet, leading CryptoQuant chief analyst Julio Moreno to recommend that the company halt its Bitcoin purchases and focus on rebuilding its cash reserves.

Moreno argues that by shoring up its balance sheet, Strategy can strengthen the investment case for both its equity and its Bitcoin holdings. The company currently holds more than 840,000 Bitcoin, which represents over 4% of the total Bitcoin supply, but it also has approximately $10.6 billion in unrealized losses from its 2024-2026 purchases.

Strategy's preferred stock is trading at a 17.5% discount to its par value, and if cash reserves continue to decline while dividend obligations remain fixed, the company may eventually need to sell Bitcoin to meet those obligations.