CryptoQuant: MicroStrategy Dividend Coverage Falls to 14 Months

CryptoQuant warned that MicroStrategy’s preferred dividend coverage has dropped to roughly 14 months after the company’s cash reserve fell 38% year-to-date. The market-data firm urged MicroStrategy to pause further Bitcoin purchases, rebuild its U.S. dollar reserves and adopt a systematic purchase plan along with a disciplined selling framework for market recoveries.

CryptoQuant’s CEO Ki Young Ju wrote that MicroStrategy should “pause Bitcoin purchases, rebuild cash reserves, and adopt a systematic framework for purchase timing,” and should prepare a “disciplined selling framework” to use when markets recover. The alert follows an increase in the company’s dividend obligations after substantial issuances of STRC preferred stock and transactions earlier this year that drew down USD holdings.

The STRC preferred shares carry an 11.5% dividend yield. CryptoQuant said annual dividend obligations tied to STRC have nearly quadrupled to about $1.2 billion, which combined with the cash decline has cut dividend coverage to roughly 14 months, down from about seven years previously. STRC traded near $82.50 last week, about 17.5% below its $100 par value, and had closed around $87.31 before the Nasdaq open, extending a roughly 12% decline over the prior month.

MicroStrategy’s cash reserve fell after the company repurchased $1.5 billion of its 2029 senior notes at a discount, a move that reduced available USD holdings. The company later sold $335.5 million of common MSTR shares, which added roughly $300 million to its dollar reserve and brought the cash balance to about $1.4 billion. CryptoQuant recommended rebuilding reserves to roughly $2.8 billion, or about 24 months of coverage, to strengthen STRC.

Trading below par limits MicroStrategy’s ability to raise capital by issuing more STRC. The firm suggested alternatives to support the preferred stock, such as increasing the nominal dividend rate to attract buyers or issuing additional common shares to signal capacity to meet dividend obligations. CryptoQuant added that “the path back to $100 is not straightforward,” and emphasized that rebuilding cash is a necessary condition for recovery.

CryptoQuant cautioned against relying on the Bitcoin treasury as the primary emergency cushion. The firm estimated the company holds about $10.6 billion in unrealized losses on its Bitcoin assets, meaning forced sales at current prices would crystallize large losses and could harm shareholder value. The firm noted MicroStrategy is not obligated to sell Bitcoin to support STRC and recommended prioritizing liquidity preservation.

MicroStrategy has said it plans to continue replenishing its U.S. dollar reserve to support the credit quality of its digital credit securities. Company executives have not given a specific cash target beyond ongoing sales of common stock and other liquidity measures. CryptoQuant’s recommendations focus on pausing further Bitcoin accumulation until cash coverage improves and establishing clear rules for both purchases and sales to reduce the risk of future liquidity squeezes.