Is Strategy Becoming a Market Indicator? Are the Gears Starting to Turn?

With a dollar reserve plus a cash pool totaling $6.69 billion in liquidity, the company claims a net leverage ratio close to zero.

Written by: Blockchain Knight

As Bitcoin rebounds to over $80,000, Strategy's stock price surged 37% in a week, while they still hold nearly $6.7 billion in cash, yet they haven't purchased a single Bitcoin in the past two weeks.

Last week, Strategy sold 18.26 million shares of MSTR common stock through a market issuance plan, raising approximately $2 billion.

Currently, Strategy holds about 840,000 BTC, with an average cost of $75,300, and based on the current Bitcoin price, they have an unrealized gain of over $3 billion.

The dollar reserve plus the cash pool totals $6.69 billion in liquidity, and the company claims a net leverage ratio close to zero.

In recent years, the market has become accustomed to Saylor's strategy of buying on dips, but this week’s actions were quite the opposite, selling $2 billion in stock without a single dollar flowing into Bitcoin.

STRC is the floating-rate preferred stock that Strategy focuses on, designed to trade around a par value of $100. In June, during the market's worst phase, STRC fell to $71.25, directly undermining the company's ability to finance Bitcoin purchases through preferred stock.

To support the price, Strategy established two buyback authorizations of $1 billion each in July, intended for repurchasing STRC and MSTR common stock.

Currently, there is $516.6 million remaining in the STRC buyback authorization, while the $1 billion buyback for MSTR common stock has yet to be utilized.

This repair process is crucial; if STRC returns to the par value, it means that Strategy's core low-cost financing channel for Bitcoin purchases is being reopened.

The company has clearly stated that it will not issue new STRC below $100, and any proceeds from future issuances above par can be used for general corporate purposes, including buying Bitcoin.

In other words, once STRC breaks through $100, the company can raise funds at a lower cost than other financing tools, continuing to expand its Bitcoin holdings.

However, the restoration of this channel is based on the continuous strength of the MSTR stock price. Last week, MSTR peaked at $126.79, an increase of about 37%, while Bitcoin only rose about 22% during the same period.

A stock price outperforming its underlying asset sounds like a good story, but don’t forget that this rally is accompanied by significant equity dilution, with a 4.59% increase in shares just that week, and MSTR is still down about 69% from its 52-week high this year.

This left foot stepping on the right foot approach relies on each step not having issues. MSTR's stock price is supported by Bitcoin's rise and its own narrative, while STRC relies on the funds from MSTR financing to support it, and the ultimate exit of the entire model is the long-term appreciation of Bitcoin.

If Bitcoin turns downward, for example, falling below its cost line, unrealized gains could turn into unrealized losses, and MSTR's premium may quickly shrink, putting pressure back on STRC.

Strategy is also quite clever; they haven’t rushed to chase the price above $80,000, but instead first repaired STRC back to par value and increased the cash pool, then reduced net leverage to zero.

This operation seems more like preparing for the next round of Bitcoin purchases, waiting for the financing channels to be fully opened before taking action.

In the short term, the gears are still turning, but the speed has slowed significantly compared to previous years, yet they appear to be smarter now. It seems that Strategy selling Bitcoin has indeed become a bottom indicator, so when they buy BTC again, will it signal the start of a bull market?

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