Background of the Suggestion: A Dire Cash Reserve Situation
On June 25, CryptoQuant Research Head Julio Moreno publicly advised Strategy to suspend its bitcoin purchases and instead focus on rebuilding cash reserves. Moreo contended that such a shift would enhance the company's financial flexibility. Strategy, widely known for its massive bitcoin holdings, has historically funded its bitcoin acquisitions through stock and debt issuances. However, the current contraction in cash reserves has raised concerns about its ability to meet short-term obligations.
Key Financial Metrics: Dividend Pressure and Unrealized Losses
Moreno underscored several critical financial indicators: Strategy's cash reserves have plunged by 38% this year. Meanwhile, the company's annual dividend obligations have surged to around $1.2 billion, compressing the dividend coverage period from multiple years to just 14 months. Additionally, Strategy's bitcoin holdings are saddled with an unrealized loss of $10.6 billion—a figure far exceeding its cash reserves, further underscoring its financial vulnerability. Halting bitcoin purchases and accumulating cash would provide a buffer against short-term debt obligations and potential market volatility.