CryptoQuant has warned that the cash buffer backing Strategy’s STRC preferred stock has deteriorated sharply, falling from about seven years of dividend coverage to roughly 14 months, while aggressive Bitcoin buying at 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 adopt a more disciplined, cycle-aware accumulation strategy, according to a Wednesday report shared with CoinDesk.
Pressure is most visible in STRC, Strategy’s flagship preferred stock, which recently dropped to around $82.50—about 17.5% below its intended $100 par value—signaling strain in an instrument designed to trade close to face value.
Preferred shares carry fixed dividends, and STRC currently offers an 11.5% yield. Its decline has come alongside Bitcoin’s broader correction and tightening liquidity within the company’s balance sheet.
CryptoQuant pointed to a significant weakening in dollar reserves, noting that Strategy’s cash position has fallen 38% since early 2026, while annual dividend obligations have surged to roughly $1.2 billion.
As a result, dividend coverage—how long reserves can sustain payouts—has collapsed from more than seven years to about 14 months. A key driver was Strategy’s $1.5 billion spend in May to repurchase convertible debt, which reduced liquidity available to support STRC.
At the same time, repeated issuance of STRC to fund additional Bitcoin purchases has driven liabilities higher, pushing annual dividend obligations from around $300 million at the start of 2026 to $1.2 billion today.
CryptoQuant estimates that Strategy would need to rebuild reserves to about $2.8 billion—roughly 24 months of coverage—for the structure to stabilize. The company currently holds about $1.1 billion in cash reserves.
Despite its large Bitcoin position, CryptoQuant argues the treasury is offering less protection than its headline size suggests.
It estimates Strategy is sitting on around $10.6 billion in unrealized losses, with Bitcoin purchased in 2024–2026 now underwater. Any forced liquidation at current prices, it warns, would lock in losses and damage shareholder value.
Still, a forced sale is not seen as imminent. Strategy is not required to sell Bitcoin to support STRC and can instead use dividend adjustments or equity issuance—tools it has already relied on.
CryptoQuant’s main recommendation is for Strategy to temporarily halt Bitcoin accumulation, rebuild its cash buffer, and resume buying only under a more structured, timing-based approach rather than continuous purchases.
It also noted that STRC dividends are cumulative, meaning missed payments must eventually be repaid, making suspension unlikely due to reputational risk among preferred investors.
The report is more critical than Benchmark-StoneX’s recent note, which rejected comparisons between STRC and Terra’s collapse and described Strategy’s model as strained but still functional.
Overall, CryptoQuant’s proposal would represent a major shift 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. A pause to rebuild cash would stabilize STRC but meaningfully alter that identity.
