Strategy’s leveraged Bitcoin model is stressed, which could limit the firm’s ability to keep buying BTC and potentially force further sales, according to Grayscale.
“The shift in approach from one of the world’s largest BTC holders has weighed on market sentiment,” said Zach Pandl, Grayscale’s head of research, on Thursday.
Michael Saylor’s Strategy sold 32 BTC on Monday, a tiny fraction of its total holdings of 843,706 BTC, but enough to rattle market sentiment as the asset has tanked by 16% since the sale.
Strategy also sold $128 million worth of shares, and its stock value has declined by 12.8% since the sale to a two-month low of $126 on Thursday.
BTC losses accelerated after Strategy sold and STRC declined. Source: Google Finance
Pandl warned this could have a greater impact on Stretch (STRC), the firm’s variable rate preferred equity instrument.
Stretch is designed to trade at a share price of around $100 and pay a dividend of 11.5%, but it is currently trading below that at around $95, meaning investors require a higher rate of return.
If Strategy raises its dividend to compensate investors, it increases cash obligations, potentially forcing more BTC sales and further price pressure in a negative feedback loop.
“Strategy’s levered business model is under pressure, and this has increased the volatility for the BTC market as a whole,” said Pandl.
He added that Grayscale thinks that Strategy will have a “limited ability to accumulate more tokens at current share prices for both STRC and MSTR.”
Related: Saylor downplays Bitcoin slide as Strategy faces $11B paper loss
Goldbug Peter Schiff said something similar on X on Thursday. If Strategy is forced to increase the dividend to return STRC to $100, the company “will run out of cash much sooner, pulling forward Bitcoin sales to fund payments.”
Pandl concluded, stating that less Bitcoin in leveraged corporate holdings would be healthier for the broader market and ecosystem.
“For the health of the Bitcoin ecosystem over the long run, less BTC on levered DAT [digital asset treasury] balance sheets and more on diversified corporate…..
