In a recent analysis, CryptoQuant’s Head of Research, Julio Moreno, has urged the firm known for its substantial Bitcoin holdings to halt its ongoing acquisition of the cryptocurrency. He suggests that the firm should prioritize strengthening its cash reserves, particularly in light of the mounting pressures facing its preferred stock, Stretch (STRC), which recently hit record lows.
On Wednesday, Stretch traded at $79.85, its lowest point yet, reflecting a broader concern among investors regarding the company’s financial stability. The analytics firm has highlighted that the firm’s so-called USD Reserve needs to be rebuilt to ensure that it can cover dividends for at least 24 months, a measure that is seen as critical to restoring investor confidence.
The dilemma arises from escalating costs associated with the firm’s preferred stock, which have placed it in a precarious financial position. Analysts suggest that if the firm aims to relieve the pressure on Stretch, stopping any further Bitcoin purchases is essential. In the last 24 hours, Bitcoin itself witnessed a significant drop of 4%, falling to its lowest valuation in over a month before recovering slightly.
Over the past month, Stretch has continuously struggled to maintain its par value of $100, raising doubts about the firm’s strategy for what it terms “digital credit.” Analysts expect a potential hike in STRC’s dividend for the eighth time, aimed at reviving the stock’s valuation. However, the effectiveness of such a move is questioned due to the firm’s dwindling cash reserves.
Just earlier this month, a report from JPMorgan noted that the firm’s future seems increasingly tied to the strength of the US dollar. Recently, the company rushed to accumulate cash for three consecutive weeks, but according to Moreno, this effort has not been sufficient. Earlier this year, the firm had allocated $2.2 billion for managing debts and dividend payments, but this buffer has diminished considerably after it opted to repurchase some of its convertible debt.
According to Moreno, the firm’s dividend coverage has plummeted from more than seven years at the start of 2026 to a mere 14 months today, underscoring the need for a significant increase in cash reserves to restore faith in Stretch. He advises the firm to develop a systematic framework for both timing future Bitcoin purchases and establishing a disciplined selling strategy.
Investor concerns intensified when the firm announced a sale of 32 Bitcoin for $2.5 million, a minor liquidation relative to its massive holdings. This action, while previous planned, sparked questions about the firm’s ability to support the Bitcoin market amid the ongoing financial challenges.
Since 2026, the firm’s dividend obligations have surged nearly fourfold, now standing at an annualized $1.2 billion. Moreno labels these escalating costs as a “structural liability,” which could amplify existing pressures on its preferred stock.
The firm has also seen a noticeable downturn in its common shares, with prices dropping more than 10% to $92.28, marking a nearly 80% decline from its peak of $457.22 last year. The preferred stock, STRC, has facilitated the accumulation of vast amounts of Bitcoin this year. When trading above $100, the firm typically issues more shares to fund Bitcoin purchases. Since the launch of this product less than a year ago, the firm has issued over $10 billion in securities.
With current holdings of 847,363 Bitcoin, the firm’s total stockpile is valued around $50 billion, but given the recent price drops, it finds itself approximately $13 billion underwater on its investments. The firm is now at a critical juncture, facing tough decisions about whether to liquidate assets to cover dividend payments, risking further unrealized losses and eroding shareholder value.
