Strategy CEO Reveals $1.44B Cash Reserve to Ease Bitcoin Concerns

Strategy CEO Reveals $1.44B Cash Reserve to Ease Bitcoin Concerns

Summary:
Strategy's CEO, Phong Le, announced the creation of a $1.44 billion cash reserve aimed at reassuring investors regarding the company's ability to navigate potential downturns in Bitcoin's market performance.

Key Takeaways:

Strategy has established a $1.44 billion cash reserve to alleviate investor concerns about its capacity to fulfill dividend and debt obligations.
The company successfully raised funds in just eight and a half days, demonstrating the ability to attract capital without having to liquidate any Bitcoin.
The firm plans to sell Bitcoin only if its stock falls below its net asset value.

Speaking to CNBC’s Power Lunch, Le explained that this initiative is a direct response to weeks of speculation regarding the firm's capacity to maintain its dividend and debt commitments amid adverse market conditions.

“We’re very much part of the crypto ecosystem and Bitcoin ecosystem,” Le stated. “That’s why we decided a couple of weeks ago to raise capital and add US dollars to our balance sheet to alleviate this FUD (fear, uncertainty, doubt).”

Strategy Creates Cash Buffer to Avoid Liquidating Bitcoin During Market Downturn

The cash reserve, which was announced on Monday and funded through a stock sale, is designed to ensure at least 12 months of dividend payments, with an objective to extend this buffer to 24 months.

The company highlighted that this stock-funded approach permits Strategy to operate without the need to sell any Bitcoin during challenging market phases.

Concerns about the stability of Strategy’s dividends have intensified recently due to Bitcoin's price decline.

Le acknowledged the market's concerns but deemed them overstated. “We weren’t going to have an issue with paying dividends, and we weren’t likely to need to sell our Bitcoin,” he shared.

“However, there was FUD circulating that suggested we wouldn’t be able to meet our dividend obligations, leading many to bet against Bitcoin.”

The CEO stressed that raising $1.44 billion in such a short timeframe was a strategic move to prove that the firm can still garner capital during market downturns.

“We did this to address the FUD and to demonstrate our capability to raise funds, even when Bitcoin is experiencing pressure.”

Last week, Le mentioned that Strategy would only contemplate selling Bitcoin if the stock price fell below net asset value and the company found itself unable to raise more funds.

Moreover, Strategy introduced a new "BTC Credit" dashboard, which asserts that the company possesses sufficient assets to maintain dividend payments for over 70 years.

Strategy Embraces Dual-Reserve Model Amid Slower BTC Purchases

In recent reports, it was noted that Strategy has moved away from its previous “buy Bitcoin at all costs” strategy towards a dual-reserve treasury model, combining long-term BTC holdings with an increasing cash reserve.

This shift follows a significant drop in the firm's purchasing pace, plummeting from 134,000 BTC per month at the peak in 2024 to just 9,100 BTC in November, indicating preparation for a possible drawn-out bear market.

Despite the decrease in acquisition, the company continues to be among the largest Bitcoin holders globally, with approximately 650,000 BTC on its balance sheet.