MicroStrategy Warned to Pause Bitcoin Buys Amid Funding Pressure

CryptoQuant CEO Ki Young Ju warned that MicroStrategy's (Nasdaq: MSTR) Bitcoin buying strategy may need to pause to avoid a funding collapse. The company's balance sheet is under strain due to rising STRC dividend obligations and declining cash reserves.

The STRC preferred shares have fallen to around 17-18% below par, reflecting the pressure on MicroStrategy's balance sheet. Annual dividend commitments have climbed to about $1.2 billion, while its U.S. dollar reserve has plunged about 38%. This leaves MicroStrategy with only about 14 months of runway to cover dividends.

CryptoQuant recommends that MicroStrategy pause Bitcoin purchases and rebuild cash reserves before resuming accumulation. The firm believes this is necessary to stabilize the STRC preferred stock, which has an effective dividend yield in the low- to mid-teens. Rebuilding cash reserves to around $2.8 billion would provide about 24 months of dividend coverage.