Bitcoin floating loss of $10.6 billion! Analysts warn: MicroStrategy should stop adding positions and replenish cash.

On-chain data analytics firm CryptoQuant has issued a financial warning to MicroStrategy, pointing out triple pressures: cash drain, a surge in dividend burden, and massive unrealized losses on Bitcoin holdings, recommending an immediate halt to additional Bitcoin purchases and a priority to rebuild cash reserves.

On-chain data analytics firm CryptoQuant recently issued a stern warning to MicroStrategy (Strategy). Analysts noted that with sharply increasing dividend payment pressure, rapidly declining cash levels, and massive unrealized losses on Bitcoin positions, Strategy should immediately stop adding Bitcoin and prioritize rebuilding cash reserves to regain market confidence.

In a report released Tuesday, CryptoQuant Research Head Julio Moreno noted that due to bear market selling pressure and market panic triggered by a sharp decline in the company's cash reserves, Strategy's preferred stock STRC fell to $82.50 last week, hitting an all-time low and trading at a 17.5% discount to its $100 par value.

Cash Freeze, Dividend Doubling: Funding Pressure from Both Fronts

The report pointed out that Strategy recently spent $1.5 billion to repurchase zero-coupon convertible senior notes due in 2029 ahead of schedule, a move that significantly weakened the cash buffer used to pay STRC dividends. To make matters worse, since the beginning of 2026, Strategy's cash reserves have shrunk by 38%.

At the same time, to raise ammunition for purchasing Bitcoin, Strategy has continuously issued more STRC preferred shares, causing the company's dividend burden to rapidly expand. Julio Moreno noted that Strategy's annualized dividend payment obligation has surged from approximately $300 million at the start of this year to $1.2 billion today, nearly quadrupling in less than half a year.

Caught in the pincer of shrinking cash and soaring dividends, Strategy's dividend coverage ratio is also facing severe challenges, dropping sharply from "enough to cover more than 7 years of dividends" at the start of the year to only 14 months. To restore coverage to a safe level of 24 months to handle the current annual dividend burden of $120 million, Strategy's cash reserves would need to be raised to $2.8 billion, roughly double the current level.

Julio Moreno stated: "Increasing cash reserves is the most direct way for the market to rebuild confidence in STRC."

Source: CryptoQuant

Although Strategy has the right to suspend STRC dividend payments, these dividends are cumulative (meaning if not paid in a period, they accumulate and must be paid later), so they will eventually have to be paid. Julio Moreno believes that given corporate reputation, Strategy is unlikely to go as far as suspending dividends.

Selling Bitcoin to put out the fire? Absolutely not!

Since cash is lacking, why not sell some Bitcoin to raise cash? Moreno strongly opposes this. He pointed out that MicroStrategy's current Bitcoin position has accumulated unrealized losses of approximately $10.6 billion; in other words, all Bitcoin purchased by the company in 2024, 2025, and 2026 is currently underwater. Julio Moreno wrote in the report:

Forced selling of Bitcoin at current price levels would instantly turn massive unrealized losses into realized losses, which would hurt shareholder equity.

However, he also added that Strategy does not face the pressure of having to sell Bitcoin to support STRC. The company could choose to raise its current 11.5% dividend rate or issue more common shares (ticker: MSTR) to prove its dividend-paying ability to the market. Moreover, both tools are currently being used, but he also admitted: "Getting STRC back to its $100 par value will be no easy road."

Three "Big Conscience Suggestions" for Strategy

Based on the above concerns, Julio Moreno offered three sincere suggestions to Strategy:

1. Pause Bitcoin purchases: Strategy should immediately stop buying Bitcoin until both cash levels and dividend coverage return to healthy standards.
2. Stop "mindless DCA": Strategy should establish a systematic, data-model-driven entry strategy. He noted that a meme is circulating in the crypto space, mocking that "Strategy always buys precisely at the peak of a wave." Blindly buying whenever cash is available is not an investment strategy; at best, it's a formula for being the "exit liquidity" at cycle tops.
3. Establish an exit mechanism: During future bull runs, Strategy should take profits on some Bitcoin holdings at appropriate times to reduce leverage and replenish cash, ensuring ample firepower to buy the dip when the next bear market winter arrives.

Earlier this month, analysts at Wall Street investment bank JPMorgan also said that after Strategy symbolically sold 32 Bitcoins, the company may need to rebuild its dollar reserves to regain investor confidence. Analysts noted that while the primary purpose of that sale was to demonstrate the company's commitment and financial flexibility to shareholders, it still made some investors uneasy.

• This article is republished with permission from: BlockGuest
• Original title: "Bitcoin Unrealized Loss of $10.6 Billion! Analyst Warns: Strategy Should Stop Adding and Replenish Cash"
• Original author: Blockchain Sister Mel