CryptoQuant has warned that the cash buffer supporting Strategy’s STRC preferred stock has deteriorated sharply, falling from roughly seven years of dividend coverage to just around 14 months, while aggressive Bitcoin accumulation during market peaks has left the company with an estimated $10.6 billion in unrealized losses.
The on-chain analytics firm argues that Strategy (MSTR) should pause Bitcoin purchases, rebuild its cash reserves, and take a more disciplined, cycle-aware approach to future accumulation, according to a Wednesday report shared with CoinDesk.
The pressure is most evident in STRC, Strategy’s main preferred stock, which recently dropped to about $82.50—roughly 17.5% below its intended $100 par value—signaling strain in an instrument designed to trade near face value.
Preferred shares pay fixed dividends, and STRC currently carries an 11.5% yield. Its decline has coincided with Bitcoin’s broader correction and weakening liquidity within the company’s balance sheet.
CryptoQuant highlighted a significant erosion in dollar reserves, noting that Strategy’s cash position has fallen 38% since early 2026, while annual dividend obligations have surged to around $1.2 billion.
As a result, dividend coverage—how long reserves can fund payouts—has collapsed from more than seven years to roughly 14 months. A major factor was Strategy’s $1.5 billion spend in May to repurchase convertible notes, which drained liquidity that otherwise supported STRC.
At the same time, repeated issuance of STRC to finance further Bitcoin purchases has sharply increased obligations, with annual dividends rising from about $300 million at the start of 2026 to $1.2 billion today.
CryptoQuant estimates Strategy would need to rebuild reserves to approximately $2.8 billion—about 24 months of coverage—for stability to return. The company currently holds roughly $1.1 billion in reserves as of mid-June.
Despite its large Bitcoin holdings, CryptoQuant argues the balance sheet is providing less protection than its headline size suggests.
It estimates Strategy is sitting on about $10.6 billion in unrealized losses, with Bitcoin acquired in 2024–2026 now underwater. Any forced liquidation at current prices, it warns, would crystallize losses and reduce shareholder value.
Still, an immediate forced sale is seen as unlikely. Strategy is not required to sell Bitcoin to support STRC and can instead rely on dividend adjustments or equity issuance—tools it has already used.
CryptoQuant’s core recommendation is for Strategy to temporarily halt Bitcoin accumulation, rebuild its cash buffer, and only resume purchases under a more structured, timing-based framework rather than continuous buying.
It also noted that STRC dividends are cumulative, meaning missed payments must be repaid later, making suspension unlikely due to the reputational risk among preferred investors.
The report takes a more critical stance than Benchmark-StoneX, which recently rejected comparisons between STRC and Terra’s failed stablecoin and described Strategy’s model as strained but not broken.
In contrast, CryptoQuant’s proposal would mark a significant departure from Strategy’s long-standing approach. The company has consistently accumulated Bitcoin, building a position of roughly 847,000 BTC, with Michael Saylor’s strategy centered on relentless buying as a core identity. A pause to rebuild cash would stabilize STRC but fundamentally reshape that model.
