Bitcoin Buyer Strategy Slammed for Lack of Cash Reserves

Strategy, the world's largest corporate holder of Bitcoin, is facing pressure to shore up its cash reserves due to ballooning costs associated with its flagship preferred stock. According to CryptoQuant Analyst Julio Moreno, the company should immediately stop buying Bitcoin and focus on rebuilding its USD Reserve to provide at least 24 months of dividend coverage.

The preferred stock, known as Stretch (STRC), has fallen to a record low of $79.85, with investors spooked by the company's announcement that it had sold 32 Bitcoin for $2.5 million. The move raised questions about Strategy's ability to buoy the Bitcoin market and highlighted the company's lack of available cash.

Moreno argued that Strategy needs to accumulate cash reserves that would last the company 24 months, rather than relying on issuing more shares to buy more Bitcoin. He noted that the company had earmarked $2.2 billion for managing debt and dividend payments at the start of this year, but that buffer has worn thin since repurchasing convertible debt several weeks ago.

STRC has enabled Strategy to accumulate swaths of Bitcoin this year, with the stock trading at or above its $100 par value triggering the issuance of more shares to buy more Bitcoin. However, Moreno warned that further paring of holdings would solidify unrealized losses on the firm's balance sheet and 'destroy shareholder value'.