This article is from: Bankless
Compiled by | Odaily Planet Daily; Translator | Azuma
On July 7, Strategy disclosed that the company sold 3,588 BTC worth approximately $216 million between June 29 and July 5.
The funds were used to pay dividends for STRC and to replenish the USD Reserve previously used for dividend payments. Despite completing this sale, Strategy stated that its full reserve-building capacity of $1.25 billion remains intact.
Note from Odaily: In the “self-rescue plan” announced last week, Strategy indicated it had authorized the company to sell BTC to establish a USD Reserve of up to $1.25 billion.
In other words, the $216 million worth of BTC sold by Strategy to replenish reserves does not count against the previously disclosed reserve-building capacity.
Strictly speaking, there is a technical distinction between the two: one is “replenishing reserves,” while the other is “building reserves.” However, in practice, both types of sales ultimately flow into the same reserve pool for the same purpose, just categorized differently.
From another perspective, the previously disclosed “BTC Monetization Program” (which refers to selling BTC) has never limited Strategy to only selling $1.25 billion worth of Bitcoin; it only restricts one funding pool—namely, the establishment of USD reserves through BTC sales.
The plan also allows Strategy to sell BTC for other purposes, which is exactly what we are seeing now.
Three Funding Pools
On June 29, after several weeks of pressure on MSTR and STRC, Strategy launched the aforementioned BTC “monetization plan” as part of its larger “Digital Credit Capital Framework.”
This plan allows Strategy to sell Bitcoin and actually mentions three main uses:
- First, to build reserves (Build the reserve), allowing the sale of up to $1.25 billion worth of BTC to establish USD reserves;
- Second, to cover preferred stock and debt costs (Cover the preferreds), meaning selling BTC to pay fixed dividends and interest obligations on Strategy’s preferred stock and debt. If management believes that “selling BTC is more beneficial than issuing common stock,” they can also use BTC sales to replenish the reserves previously used for these obligations.
- Third, to fund buybacks (Fund buybacks), meaning selling BTC to repurchase up to $1 billion of preferred shares and up to $1 billion of MSTR common stock. Additionally, proceeds from BTC sales may also be used to cover related taxes, fees, and other expenses.
At that time, the entire market discussion focused on the $1.25 billion limit of the first funding pool, but the reality is far from that.
Looking only at the third funding pool, it actually adds an additional $2 billion in selling capacity, so just considering the clearly defined limits, the BTC selling scale currently designed by Strategy already exceeds $3 billion, not including the funding pools for paying dividends, interest, and replenishing reserves—this part currently has no clearly defined limit.
Building vs. Replenishing
The truly subtle point lies here.
The purpose of the USD Reserve is to pay these preferred stock dividends and debt interest obligations. Under the current policy framework, it cannot be used for stock buybacks.
As of June 28, Strategy’s USD Reserve stood at $2.55 billion, sufficient to cover the company’s annual obligations of approximately $1.76 billion in debt and preferred stock payments, roughly equivalent to a 17-month coverage period. The minimum requirement set by Strategy’s board is to maintain a 12-month coverage level unless the board approves a reduction of this standard.
This is also why the distinction between “building reserves” and “replenishing reserves” is worth noting.
- Selling BTC before paying dividends adds cash to reserves: this is defined as “building.”
- Using reserves to pay dividends, then selling BTC to replenish reserves: this is defined as “replenishing.”
The plan treats the two as different categories, but they are essentially doing the same thing—converting BTC into cash to cover preferred stock dividends and interest expenses.
These details have actually been disclosed in the documents, but the recent round of sales has made the difference in classification more apparent. Strategy sold $216 million worth of BTC, using the funds to pay dividends and replenish reserves, while still announcing that its $1.25 billion reserve-building capacity remains intact.
Now, the market needs to start understanding Strategy’s “special language”: “building” and “replenishing” are essentially just accounting classifications, but they determine whether Strategy’s BTC sales will occupy the “public limit” seen by the market.
From Hoarding to Active Capital Management
In the announcement on June 29, Michael Saylor stated that the framework reflects Strategy’s need for “liquidity, discipline, and active capital management.”
Strategy CEO Phong Le was even more direct: “Strategy is transitioning from a one-way capital issuance model to an active capital management model.”
As explained by Matt Walsh and Jeff Dorman from Castle Island last week on their podcast, Strategy has effectively been evolving into an actively managed hedge fund.
The past narrative of Strategy was very simple: sell MSTR stock → buy Bitcoin → provide investors with leveraged BTC exposure, but the logic has now changed.
Today, Strategy is buying and selling different components of its capital structure to manage the pressure relationships between common stock (MSTR), preferred stock, USD reserves, and Bitcoin assets (BTC).
This dynamic also brings new conflicts of interest, as Walsh and Dorman point out:
- Selling common stock can support preferred stock dividends but will depress the premium of MSTR relative to its BTC value;
- Selling Bitcoin can extend cash flow duration but will further undermine the core narrative of “never selling”;
- Supporting the preferred stock system can maintain market confidence but will deplete cash reserves;
- Cutting preferred stock dividends can protect liquidity but may lead to a collapse in preferred stock prices.
The so-called “reserve loophole” is a manifestation of this shift. Now, Bitcoin is no longer just an asset that Strategy uses to continuously accumulate; it is becoming a balance-sheet lever used to maintain the operation of the preferred stock system.
What Will We Ultimately See
Now, investors must assess whether Saylor has the capability to operate such a “machine”—every adjustment of a lever in the capital structure will help one part while potentially threatening another.
This is precisely the most noteworthy conclusion following the disclosure of the document on July 6. Strategy does not lack options. It may have more operational space than the market perceives.
Please do not mistakenly believe that the $1.25 billion limit represents the total cap on Strategy’s Bitcoin sales.
Now, Strategy has become an institution that needs to be re-understood by the market. Every specialized term has become more important:
- Build;
- Replenish;
- Issue;
- Repurchase;
- Defend;
Just as Federal Reserve observers carefully analyze every punctuation mark in each policy statement, the market must also dissect every term used by Strategy to determine what it means for future BTC sales.
By launching this plan, Strategy has gained greater flexibility, but the underlying contradictions remain. This is no longer a simple “leveraged Bitcoin trade”; it has now turned into a bet on the ability to manage capital actively.
Can Strategy continue to effectively “sell BTC,” “replenish reserves,” “issue securities,” “repurchase stock,” and “maintain capital structure” while ensuring that none of these aspects undermine the others?
Personally, I am not willing to place a bet on that.
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