Grayscale: MicroStrategy’s leveraged Bitcoin model under strain
Grayscale warns MicroStrategy’s leveraged Bitcoin model is under stress after it sold 32 BTC and $128M of stock, noting STRC discount and dividend pressure could prompt more BTC sales.
Grayscale warned MicroStrategy’s leveraged Bitcoin model is under stress after the company sold 32 BTC and about $128 million of MSTR shares. The sale completed on Monday. MicroStrategy held 843,706 BTC before the sale.
Zach Pandl, Grayscale’s head of research, wrote on Thursday that MicroStrategy’s shift away from strict accumulation has hurt market sentiment. Bitcoin has fallen about 16% since the sale, and MicroStrategy’s stock dropped roughly 12.8% to near $126 on Thursday.
Pandl highlighted STRC, a variable-rate preferred equity designed to trade near $100 and pay an 11.5% dividend. STRC was trading around $95, which implies investors are seeking a higher yield. Pandl wrote that raising the dividend to restore STRC could increase cash obligations and might require additional Bitcoin sales to fund payments.
Pandl wrote, “MicroStrategy’s levered business model is under pressure, and this has increased the volatility for the BTC market as a whole.” He also wrote, “For the health of the Bitcoin ecosystem over the long run, less BTC on levered DAT balance sheets and more on diversified corporate balance sheets will be a positive, in our view.”
Market participants reacted to the sales and STRC’s decline. Jeff Ko, chief analyst at CoinEx, described MicroStrategy’s first Bitcoin sale as “an important psychological trigger” for the week’s sell-off but added the sale could give the company more flexibility to manage balance-sheet risk. Peter Schiff warned that increasing STRC payouts could accelerate MicroStrategy’s need to sell BTC. Augustine Fan, a partner at SignalPlus, noted investors are watching how MicroStrategy balances dividend payments, STRC’s discount and its digital-asset treasury holdings.
Grayscale noted the combination of asset sales and STRC’s drop increased volatility for the Bitcoin market. Market participants are watching MicroStrategy’s next actions on dividend policy, share issuance and any further asset sales for signs of how the company plans to manage liquidity and its large Bitcoin position.
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