Grayscale Warns Strategy May Struggle to Keep Buying Bitcoin

Strategy’s bitcoin buying model is facing new scrutiny after Grayscale warned that current share prices could limit future accumulation. The concern followed a bitcoin sale, STRC dividend pressure, and questions over whether Strategy can keep funding purchases without stronger investor demand.

Key Takeaways:

• • Grayscale says Strategy’s weaker shares may restrict future bitcoin purchases.
• • Dividend pressure from STRC could raise costs and increase BTC market volatility.
• • Analysts remain split as traders watch for another Strategy purchase disclosure.

Grayscale Flags Rising Risks to Strategy’s Bitcoin Accumulation Machine

Strategy’s bitcoin strategy is facing a new test as questions emerge about how long the company can sustain its aggressive accumulation model.

Grayscale Head of Research Zach Pandl warned that Strategy (Nasdaq: MSTR) may have a limited ability to acquire additional BTC at current MSTR and STRC share prices. STRC, known as Stretch, is the company’s variable-rate preferred equity instrument.

“In a nutshell, Strategy’s levered business model is under pressure, and this has increased the volatility for the BTC market as a whole,” he said, adding:

“Further, we think that Strategy—which historically has been a net buyer of BTC—will have a limited ability to accumulate more tokens at current share prices for both STRC and MSTR.”

The sale disclosed last week marked Strategy’s first BTC disposal since 2022, turning a small transaction into a major market signal. Strategy’s dashboard showed MSTR at $120.44, down 6.90%, while BTC traded at $63,054 and the company held 843,706 BTC.

Strategy’s Preferred Stock Becomes a New Test for Its Bitcoin Model

STRC is designed to trade near $100 and currently pays an 11.5% dividend. The dashboard showed the preferred stock at $93.40, below its target level, with an effective yield of 12.31%. That discount helps explain Grayscale’s concern that the market may require higher returns, potentially forcing Strategy to raise its dividend and reducing flexibility for future BTC purchases.

While Strategy’s first bitcoin sale attracted significant attention, the Grayscale head of research argued that the market impact on the company’s financing vehicles may be the bigger concern. “Even more important, we think, is the impact of this recent volatility on the price of ‘Stretch’ (STRC), Strategy’s variable-rate preferred equity instrument,” he cautioned. “At current share prices, we think that the company’s ability to accumulate more bitcoin is limited.”

Nonetheless, Pandl concluded:

“Over the long run, however, we believe that more diversified ownership of bitcoin… will help bolster the token price and improve market resilience.”

Despite its concerns about Strategy’s financing model, Grayscale still expects bitcoin to recover over the coming months, although BTC may trail crypto market segments that benefit more directly from near-term regulatory clarity.

Strategy’s leadership, however, maintains that its accumulation strategy remains intact. CEO Phong Le said the company’s goal is to increase net bitcoin and bitcoin per share over time, while Executive Chairman Michael Saylor’s “A good time to add more dots” post fueled expectations of another purchase disclosure.

Standard Chartered’s Geoffrey Kendrick also suggested Strategy could soon announce a purchase of 320 BTC or even 3,200 BTC, dwarfing the recent 32 BTC sale. The bank has also maintained a $100,000 bitcoin target, highlighting how some market participants continue to focus on BTC’s long-term upside despite concerns about Strategy’s financing model.