Strategy, the enterprise Bitcoin holding company led by CEO Phong Le, has said that part of the reason for creating the $1.44 billion US dollar reserve is to protect the company from being forced to sell its Bitcoin holdings during market downturns.
During an interview on Friday, Le said:
At the beginning of the week, Strategy announced the $1.44 billion US dollar reserve, funded through a stock sale. Le explains that the reserve had been raised in just over a week and will fund dividends on preferred stock and interest payments on outstanding debt over a period of at least 12 months, with plans to extend coverage to 24 months gradually. Le noted that this dual-reserve strategy provides them the flexibility to navigate volatile market conditions without having to liquidate Bitcoin.
Phong Le says new reserve neutralizes dividend FUD and strengthens market confidence
The creation of the USD reserve comes amid concerns that Strategy may be unable to continue servicing its debts and dividend payment obligations if the stock price falls too far. “And it’s really this FUD,” Le said on Friday. The move represents a strategic shift from the company’s previous approach, which primarily relied on issuing debt or shares to acquire more Bitcoin.
Le emphasized that they wouldn’t have an issue paying their dividends, and they weren’t likely to have to sell their Bitcoin. Still, he noted that FUD was spread that the company would fail to meet its dividend obligations, which caused people to pile into a short Bitcoin bet.
He said that the short time frame used for the $1.44 billion – 21 months’ worth of dividend obligations was intended to show people that they are still able to raise money in a Bitcoin downcycle.
Last week, Le said that Strategy would only consider selling Bitcoin if its stock fell below net asset value and the company no longer had access to fresh capital. The company also launched a “BTC Credit” dashboard, which claims it currently has enough assets to service dividends for more than 70 years.
As of now, Strategy holds over 650,000 BTC, purchased at an average price of $87,000 per coin. The creation of the USD reserve ensures that the company can avoid selling Bitcoin during short-term downturns, allowing it to stay aligned with its long-term crypto-focused strategy.
Corporate BTC treasuries take a bigger role as miner pressures and volatility rise
The timing of the reserve also matches with mounting pressure on Bitcoin miners, whose production costs have risen following recent halvings. As miners come under increasing pressure with tighter margins and higher break-even prices, analysts say corporate holders such as Strategy are increasingly contributing to the stability of the markets. Strategy’s moves, along with its enormous BTC treasury, pretty much make it one of the market’s biggest long-term claimants.
As miners cut supply and short-term volatility gathers momentum, institutional balance sheets—rather than mining output—are also increasingly determining investor confidence. A group of market watchers also argues that Strategy’s reserve represents a maturing phase for Bitcoin as a corporate asset, signalling the movement away from speculative accumulation towards structured financial management.
The miners’ and overall production costs of Bitcoin are often discussed on a much smaller scale than those of other cryptocurrencies; however, Strategy’s balance sheet strength and proactive risk management now play a significant role in market confidence, according to industry analysts. The reserve suggests that even during adverse cycles of the crypto market, corporate holders can minimize liquidity risk.
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Source: https://www.cryptopolitan.com/strategy-says-reserve-prevents-btc-sales/
