CryptoQuant says Strategy should pause bitcoin purchases and rebuild cash reserves

Michael Saylor's Strategy should pause bitcoin purchases and focus on rebuilding its cash reserves as dividend obligations have increased, cash reserves have fallen, and unrealized bitcoin losses have mounted, according to onchain analytics firm CryptoQuant.

The recommendation comes as Strategy's preferred stock STRC fell to $82.5 last week, a record 17.5% below its $100 par value, after bitcoin bear market pressure coincided with a sharp decline in the company's cash reserves, Julio Moreno, head of research at CryptoQuant, said in a Tuesday report. Moreno noted that Strategy recently repurchased $1.5 billion of its 0% convertible senior notes due 2029, reducing the cash buffer available to support STRC dividends. At the same time, Strategy's cash reserves have fallen by 38% since the start of 2026.

Meanwhile, Strategy's dividend obligations have also increased sharply because the company issued more STRC to fund bitcoin purchases. Dividend obligations have increased from about $300 million annualized at the start of the year to roughly $1.2 billion today, a nearly fourfold increase in less than six months, Moreno noted.

As cash reserves fell and dividend obligations increased, Strategy's STRC dividend coverage has dropped from more than seven years at the start of the year to just 14 months, according to Moreno. At the current annual dividend burden of $1.2 billion, Moreno estimates Strategy would need about $2.8 billion in cash reserves to restore 24 months of dividend coverage, roughly double its current level. "A higher cash reserve is the most direct signal the market needs to regain confidence in STRC," Moreno said.

Although Strategy can suspend STRC dividend payments, these dividends are cumulative and have to be paid at some point, Moreno noted, adding that Strategy is unlikely to suspend the dividends as it would hurt credibility.

Moreno further said that selling bitcoin to rebuild cash reserves would not be a good option for Strategy as the company currently sits on an aggregate unrealized bitcoin loss of about $10.6 billion, with all bitcoin purchased during 2024, 2025, and 2026 currently underwater. "Any forced Bitcoin sale at current prices would crystallize these losses at scale and destroy shareholder value," Moreno wrote.

Moreno also said Strategy is not obligated to sell bitcoin to support STRC and can instead raise the current 11.5% dividend yield or issue MSTR stock to signal its ability to continue paying dividends. He added that both tools are already being used. "However, the path back to $100 is not straightforward," he noted.

'Some unsolicited advice'

Given the concerns, Moreno has "some unsolicited advice" for Strategy. First, the company should pause bitcoin purchases until cash reserves and dividend coverage are restored.

Second, Strategy should develop a systematic, model-driven approach to bitcoin purchase timing. "'Strategy always buys the local top' has become a genuine market meme," Moreno said. "Buying whenever capital is available is not a strategy — it is a formula for accumulating at cycle peaks."

Third, the company should develop a framework for selling portions of its bitcoin holdings during future bull markets to realize gains, reduce leverage, and build cash reserves that could later be deployed during market downturns.

Earlier this month, JPMorgan analysts also said Strategy may need to rebuild its dollar reserves to restore investor confidence after the company sold 32 bitcoin. The analysts said the sale "spooked" markets even though it was largely symbolic and intended to demonstrate Strategy's commitment and flexibility to preferred stockholders.