Grayscale raised concerns over Strategy's leveraged Bitcoin accumulation model following the company's sale of 32 BTC on June 1. Grayscale Head of Research Zach Pandl said weaker prices for Strategy's preferred equity could lift dividend commitments and increase the likelihood of additional Bitcoin sales. The report comes as Strategy, which holds about 840,000 BTC, faces mounting scrutiny over its capacity to continue expanding its Bitcoin holdings through its leveraged treasury approach.
Strategy Sells 32 BTC on June 1
Strategy disclosed on June 1 that it had sold 32 Bitcoin. The amount was relatively small compared with the company's balance sheet, which holds about 840,000 BTC. The move marked a notable shift for one of the largest corporate holders of Bitcoin and weighed on investor sentiment, according to Grayscale's report.
Grayscale said the latest wave of market volatility was driven in part by Strategy's disclosure. The firm argued that Strategy's capacity to keep adding to its Bitcoin holdings is becoming more limited, a development that could contribute to greater volatility across the wider market. Grayscale also suggested that additional buyers may be necessary before Bitcoin can form a more durable floor.
Preferred Equity Weakness Raises Concerns Over Future Bitcoin Sales
Grayscale placed particular emphasis on the recent weakness in STRC, Strategy's variable-rate preferred equity instrument. The security is designed to trade near $100 and currently carries an 11.5% dividend. When the share price falls below that level, investors typically demand a higher return. While Strategy could respond by raising the dividend, doing so would increase future cash obligations and could create pressure for more Bitcoin sales, which may add further downside pressure to the market.
The company said Strategy's leveraged business model is facing mounting strain, and that this has contributed to elevated volatility in Bitcoin trading. The firm also noted that, at current share prices, Strategy may have limited room to expand its Bitcoin holdings through either STRC or MSTR.
Grayscale Expects Bitcoin Recovery Despite Near-Term Headwinds
From a longer-term perspective, Grayscale said a broader distribution of Bitcoin ownership across corporate balance sheets could strengthen the market's resilience. The report added that other buyers would need to step in for Bitcoin to establish a sustainable bottom. Grayscale Research expects Bitcoin to recover over the coming months, although it said BTC may underperform some other crypto sectors in the near term if those segments benefit more directly from improving regulatory clarity.
FAQ
What did Strategy sell on June 1?
Strategy sold 32 Bitcoin on June 1. The company holds about 840,000 BTC on its balance sheet.
Why is Grayscale concerned about Strategy's preferred equity?
Grayscale said weaker prices for STRC, Strategy's variable-rate preferred equity instrument, could increase dividend obligations and create pressure for additional Bitcoin sales. STRC is designed to trade near $100 and currently carries an 11.5% dividend.
What is Grayscale's outlook for Bitcoin?
Grayscale Research expects Bitcoin to recover over the coming months, although it said BTC may underperform some other crypto sectors in the near term if those segments benefit more directly from improving regulatory clarity.
