Galaxy: Strategy Uses Time to Trade for Space, Waiting for the Market to Improve

Note: The announcement Strategy released last Monday marks a major turning point for the world’s largest corporate holder of Bitcoin. The market has bought into it, but will this move silence the critics? This article was published in__Galaxy Research’ weekly research roundup July 3_，compiled by Golden Finance xiaozou._

Last Monday, Michael Saylor’s Strategy (MSTR) announced a major adjustment to its capital management framework. Its preferred-share “digital credit” product system has faced significant pressure over the past several weeks.

STRC, the company’s flagship Stretch series preferred stock, was expected to trade around the $100 par value. But as Bitcoin has fallen over the past two months, its price has dropped well below par. Strategy’s dollar reserves have shrunk, and investors have started to question how the company will settle an ever-growing preferred-share dividend bill. STRC fell below $83 on June 18, then hit a record low of $71.25 on June 26. In the same period, Strategy’s common shares and BTC both came under pressure.

The debate quickly narrowed to three uncomfortable options: sell Bitcoin, issue more common stock to dilute MSTR shareholders, or suspend/cut preferred-share dividends. One of the most blunt critics, Arca chief investment officer Jeff Dorman, argued that Strategy’s capital structure forces MSTR shareholders, BTC holders, and preferred shareholders to compete for value on the same balance sheet. Cointelegraph summarized his view as a grim scenario for Strategy: “Sell BTC to pay preferred dividends” or “Stop paying dividends.” Benzinga also summarized the bad options Dorman listed: selling BTC to weigh on bitcoin market sentiment, selling stock to dilute MSTR, issuing debt to drag down credit, and cutting preferred-share dividends that could potentially break through preferred pricing and create legal risks. CryptoQuant also warned that Strategy’s dividend coverage has sharply deteriorated, urging the company to pause BTC purchases and rebuild cash reserves.

Last Monday, Strategy responded with a major capital-management overhaul. The company adopted a new “Digital Credit Capital Framework,” built around five tools: a dollar reserve policy subject to board approval; a revised STRC dividend policy; a $1 billion preferred-share repurchase authorization; a $1 billion MSTR common-share repurchase authorization; and a BTC monetization (liquidity realization) plan. The board also raised STRC’s annual dividend rate from 11.5% to 12%, effective for July 1 and subsequent accrual periods (semi-monthly).

The market has validated the response. On Monday, MSTR rose 12.6% to about $92.70, while STRC gained 12.2% to about $83.70. As of late Thursday at press time, STRC traded near $87—still clearly below par, but rebounding significantly from the lows—while MSTR, around $100, saw a modest recovery in BTC to about $61,763.

This move is fairly sensible for Strategy, but it may not solve the structural problems once and for all. Strategy still holds a large stack of preferred shares and also carries substantial recurring payment obligations. And with the company’s $6.7 billion outstanding convertible notes maturing in 2027 and 2028, these obligations will further intensify. Strategy’s “engine” still depends on BTC, MSTR, and its preferred shares continuing to have financing capacity. Admittedly, in a sense, Strategy’s move last Monday only pushes the problem back by another step—but it kicks it quite far.

Galaxy’s conclusion is as follows:

The market’s core concern has never been that Strategy lacks assets. The company holds about 847k BTC—making it the second-largest bitcoin holder in the world after Satoshi Nakamoto (estimated to hold about 1.1 million BTC). The market worries that Strategy lacks enough dollar liquidity to pay preferred-share dividends comfortably without damaging any group of stakeholders. If it sells BTC, BTC holders may view it as a betrayal of Saylor’s “never sell bitcoin” creed. If it issues more MSTR, common shareholders will be diluted—and not to buy more BTC. If it raises the STRC dividend rate again to coax the price back to the $100 par value, it will increase the cost of preferred-share financing. If it stops paying preferred-share dividends (which the company can decide at its discretion), confidence in the entire digital credit structure will collapse completely.

By raising more than $1 billion in cash through a common share offering, establishing at least a 12-month minimum cash reserve policy, and lifting the current cash coverage cycle to about 17 months, Strategy successfully flipped the narrative. The market had previously worried about a tight short-term funding pipeline, and Strategy gave itself ample breathing room. But the most important part of this announcement is not any single action—it is the series of tools authorized by the board, which gives Strategy real optionality. This is exactly the meaning behind what Strategy CEO Phong Le said: “Strategy is evolving from one-way capital issuance toward active capital management.” Strategy is signaling to the market that it can manage both sides of its balance sheet rather than simply stockpiling BTC while ignoring market conditions.

The most controversial part of the announcement is the “BTC monetization” plan. The wording seems to clearly imply that Strategy may sell BTC from time to time. Given the company’s historical tendency to act immediately after announcements, the likelihood that it has already been selling BTC in the market this week is entirely plausible. We do not want to see Strategy sell bitcoin. The company’s identity, and the key cornerstone of the MSTR premium built over the years, is the premise of “providing leveraged, permanent, institutional-grade long-term BTC risk exposure tools.” Selling coins would erode that narrative. Moreover, BTC selling could trigger a negative reflexive cycle: the more investors believe Strategy might sell, the weaker BTC may become, which then transmits weakness to MSTR and STRC and raises expectations for further selling. But we understand why the board needs this “pressure-release valve.” A company holding 847,363 BTC should not fall into an existential narrative crisis due to temporary cash-flow anxiety—criticism and panic from some recent market participants have been growing increasingly hysterical. If selling a small amount of holdings can prevent a spiral of capital-structure disorder, protect preferred shares, and allow Strategy to wait for better market conditions, that is a reasonable path.

Even so, there is a fourth option that has not received enough attention: Strategy should explore generating yield from its BTC holdings without necessarily selling spot. This could mean lending out a small portion of BTC from segregated custody under conservative terms, or harvesting volatility returns through options strategies while retaining most of the upside. Such structured trades can achieve partial monetization of holdings while controlling counterparty risk, custody risk, and time-to-maturity risk. These ideas are not without risks (lending introduces counterparty risk, options may limit upside), and excessive action would damage what MSTR holders value most: asymmetric upside exposure to bitcoin. However, Strategy does not need to monetize the entire position. Even a limited, tightly risk-managed plan can create recurring dollar income and reduce the need to choose between spot selling and equity dilution. This attractive middle path should be part of the discussion.

In summary, we are confident that Strategy’s decision to enhance operational optionality is wise. The current bitcoin market environment is quite subdued; the bottom may be unconfirmed. Sometimes the best trade is to do nothing—and Strategy’s move should buy it the space and time to wait for the market to turn warmer.