Strategy’s Bitcoin Model Under Pressure, Grayscale Warns

Grayscale warned Strategy’s leveraged Bitcoin model is stressed, which could limit the firm’s ability to keep buying BTC and potentially force further sales. "The shift in approach from one of the world’s largest BTC holders has weighed on market sentiment," said Zach Pandl.

Michael Saylor’s Strategy sold 32 BTC on Monday, a tiny fraction of its total holdings of 843,706 BTC, but enough to rattle market sentiment as the asset has tanked by 16% since the sale. Pandl said the strain could hit Stretch (STRC), the firm’s variable rate preferred equity instrument.

Stretch is designed to trade at a share price of around $100 and pay a dividend of 11.5%, but it is currently trading below that at around $95, meaning investors require a higher rate of return. If Strategy raises its dividend to compensate investors, it increases cash obligations, potentially forcing more BTC sales and further price pressure in a negative feedback loop.

bitcoin, btc, grayscale, strategy, stretch, strc, michael saylor, dividend, preferred equity, leveraged model