Key facts
- CryptoQuant advised Strategy to stop buying Bitcoin and focus on cash reserves.
- Strategy's cash reserves have fallen 38% year-to-date.
- Current dividend coverage is 14 months, down from over seven years.
- Strategy's preferred stock, STRC, has fallen below its $100 par value.
- CryptoQuant recommends a target of 24 months of dividend coverage.
CryptoQuant has warned that Strategy should immediately cease its Bitcoin purchases and prioritize rebuilding its cash reserves, which have fallen 38% year-to-date. Analyst Julio Moreno stated that the company's current cash can cover dividends for only 14 months, a significant drop from over seven years previously. Moreno advised that Strategy's USD Reserve should be rebuilt to cover at least 24 months of dividends to restore market confidence.
The firm's preferred stock, STRC, has fallen to a record low below its $100 par value, a situation exacerbated by ballooning costs associated with the stock's high dividend yield. Strategy's dividend obligations have nearly quadrupled to $1.2 billion annually. The company's common shares have also seen a significant decline, dropping over 10% to a 27-month low.
Strategy currently holds 847,363 Bitcoin, valued at approximately $50 billion, representing an unrealized loss of about $13 billion. Moreno suggested that Strategy needs a disciplined framework for timing Bitcoin purchases and sales.