Bitcoin maintained a trading range above $60,000 on Saturday, reaching $60,240.5 at 04:37 ET (08:37 GMT), marking a slight uptick of 0.40%. This movement occurred amidst growing concerns surrounding Strategy Inc.’s Bitcoin accumulation strategy, particularly as investors anticipate a significant dividend reset scheduled for June 30.
Strategy’s perpetual preferred shares, known as STRC, will trade ex-dividend on that date, prompting the monthly rate reset. Investors holding these shares prior to the ex-dividend date will receive their first semi-monthly dividend payment of $0.48 per share on July 15. The reset of the dividend rate is seen as a central issue, especially as STRC currently trades at about $73 — approximately 27% below its $100 par value — which translates into an effective yield of roughly 15%.
Speculation has emerged that Strategy may consider raising the dividend rate from its current level of 11.5% to align better with prevailing market conditions. This uncertainty around STRC has reignited discussions regarding Strategy’s fundraising strategies. Ripple’s CEO, Brad Garlinghouse, expressed his continued optimism about Bitcoin but criticized the company’s strategy of relying heavily on preferred stock issuance to finance further Bitcoin acquisitions. He described this as a form of financial engineering that detracts from sustainable value creation, noting that the recent decline of STRC below par value indicates dwindling investor confidence in this funding model. Garlinghouse emphasized that his critiques were aimed at the financial strategies employed by Strategy, rather than the cryptocurrency itself.
Strategy Inc. has amassed approximately 844,000 Bitcoin, averaging a purchase price of about $75,600 per coin. With current market prices hovering near $60,240, the company’s unrealized losses surpass $13 billion, as highlighted by BitcoinTreasuries data. This staggering paper loss exceeds the total market capitalizations of several prominent cryptocurrencies, such as Dogecoin, Cardano, Chainlink, Litecoin, and Bitcoin Cash, underlining the extensive risks associated with Strategy’s leveraged positions in Bitcoin.
In light of the prevailing situation, some analysts have suggested that Strategy should consider pausing its Bitcoin acquisitions to fortify its cash reserves, particularly as lower preferred share prices complicate efforts to raise new capital. Conversely, others maintain that the financing structure remains intact, contending that long-term performance will ultimately hinge on the recovery of Bitcoin’s price rather than the temporary volatility of preferred shares.
