This week, Strategy introduced a new capital framework that permits selective sales of bitcoin to finance preferred dividends, while also allowing for repurchases of preferred shares and stock buybacks. The framework establishes a minimum cash reserve sufficient for 12 months of preferred dividends and interest payments. Currently, Strategy’s cash balance of $2.55 billion can support approximately 17 months of these obligations.
According to Hougan, this development indicates a significant transition in Strategy’s role within the bitcoin market. Instead of acting as the predominant one-way buyer in the cryptocurrency sphere, the company is expected to adopt a more adaptable approach, with bitcoin buy and sell decisions influenced by prevailing market dynamics.
In the future, Bitwise anticipates that institutional investors—including asset managers, banks, pension funds, endowments, and sovereign wealth funds—will take over as the main drivers of bitcoin demand, shifting away from Strategy.
On a broader spectrum, the volatility of STRC is indicative of a de-leveraging phase that commonly occurs during the latter part of every crypto market cycle. As speculative excess diminishes, the market is likely to approach a more stable base, although the precise timing of this event remains uncertain, as noted in the report.
JPMorgan, a major Wall Street bank, commented that Strategy’s revised policy permitting selective bitcoin sales for preferred dividends introduces unnecessary two-way risk, amplifying uncertainty and volatility in the market.
Read further: JPMorgan warns that Strategy’s bitcoin sales policy heightens ‘two-way risk’ in crypto markets