Bitcoin Company Strategy Builds Cash Reserves Amid Preferred Share Volatility

Bitcoin treasury company Strategy accumulated cash for a third straight week, attempting to strengthen its balance sheet as its flagship preferred share faced record volatility and tumbled to new lows.

The Tysons Corner, Virginia-based firm shored up its so-called USD reserve with $300 million, lifting it to $1.4 billion, according to a press release.

The funds were completely derived from issuing common stock, yielding $335 million for the Bitcoin-buying firm.

Meanwhile, the company purchased 520 BTC for $35 million.

The purchase represented the firm’s smallest since it sold 32 BTC three weeks ago, a liquidation that preceded the company’s worst weekly performance since November 2022.

With Bitcoin trading at around $65,000, a 1.5% increase over the past day, Strategy’s stockpile stood at $55 billion.

The firm owned 847,363 BTC, showing a loss of roughly $9 billion on paper.

Strategy and STRC

Strategy’s latest move centered around Stretch (STRC).

The product, which currently offers an 11.5% annual dividend, fell as low as $82.53, drifting around 17% from its $100 par value and testing investors’ faith in Michael Saylor’s vision for “digital credit” on Friday.

STRC has enabled Strategy to accumulate swathes of Bitcoin this year, but recurring costs associated with it have become a point of uncertainty among investors, analysts say.

Not long after the opening bell, STRC steadied around $91, according to Yahoo Finance.

Because STRC, at its current size, has saddled Strategy with $100 million in additional monthly costs, the company’s cash reserves have become a core mechanism through which the Bitcoin-buying firm conveys the sustainability of its business model to investors.

At $1.4 billion, the funds now provide Strategy with more resources to manage dividends and debt.

On Monday, Saylor tweeted that the firm “plans to continue replenishing them to support the credit quality of its Digital Credit securities.”

On Friday, when markets were closed in recognition of Juneteenth, Saylor recognized the strain that STRC’s tumble has put on some investors, including retirees who invested in the product as a low-volatility option.

He said, “Volatility is never easy.”

For the firm’s common stockholders, Strategy’s efforts to rebuild cash reserves, which stood at $2.25 billion months ago, have hampered one of the company’s core metrics.

The company has long dedicated itself to increasing the amount of Bitcoin that it owns per share.

Following the company’s latest move, the year-to-date growth rate of Bitcoin-per-share slowed down, falling from 12.8% to 11.8% over the course of three weeks.

“You destroyed value by effectively selling $1.20 worth of Bitcoin to buy $1 worth of Bitcoin,” economist and Bitcoin critic Peter Schiff tweeted.

Nonetheless, Strategy shares rose 3.8% to $116.60.

Earlier in the session, they rose as high as $120, narrowing 27% losses over the past month.

Strive outpaces Strategy’s Bitcoin buys

Asset manager Strive announced on Monday that it added 750 BTC to its stockpile.

At 19,864 BTC, the firm’s holdings were worth around $1.3 billion.

The company offers a similar product to Stretch dubbed SATA, which currently features a 13% annual dividend rate.

SATA rose 0.6% to $98.26, a sharp increase from $92.88 on Friday.

The company’s common shares also rallied 6.3% to $15.71, a 13% slide over the past month.

Strive CEO Matt Cole posited on Friday that SATA’s dip was the product of a liquidation event.

It appeared that the preferred stock was subject to forced selling, he said, as weakness in STRC spilled over to other products that are modeled on it.

“Friday was the most significant stress test Digital Credit has faced so far,” he said.

“The market absorbed it, buyers emerged, and both securities recovered substantially from their lows.”