Strategy, the bitcoin treasury firm formerly known as MicroStrategy, has established a reserve totaling $1.44 billion to ensure consistent dividend payments to its shareholders, even during periods of bitcoin price decline. With this reserve, the company aims to mitigate the risks associated with bitcoin market volatility.
Currently, Strategy holds approximately 650,000 BTC, which accounts for around 3.1% of the entire bitcoin supply. Despite the formation of this substantial reserve, the company has not ruled out the possibility of selling some of its bitcoin assets. CEO Phong Le indicated that if the company”s market-adjusted net asset value (mNAV) falls below 1, it may consider liquidating part of its holdings.
Le disclosed during a recent company update that this reserve was created through the sale of MSTR equity over a nine-day period. The firm”s objective is to secure enough funds for a minimum of 12 months” worth of dividends, with aspirations to extend this coverage to 24 months. Strategy co-founder and Executive Chairman Michael Saylor elaborated, stating, “Bitcoin is volatile, and what we want to do is deliver a digital credit product to volatility-adverse investors.”
Saylor emphasized that the newly established dollar reserve is intended to protect dividend payments from fluctuations in bitcoin”s market performance. Recently, Le discussed on the “What Bitcoin Did” podcast that the firm would be prepared to sell its bitcoin holdings if its mNAV dropped below the critical threshold of 1, indicating that the market value of its assets would be less than the company”s valuation.
In the latest company update, Saylor responded to skeptics who doubted the company”s willingness to sell bitcoin to uphold dividend payments. He affirmed that not only could the company liquidate bitcoin to cover dividends, but it could also sell appreciated bitcoin, thereby increasing its holdings in subsequent quarters.
Having transitioned from a software solutions company to a leader in digital asset treasury management in 2020, Strategy has rapidly expanded its bitcoin reserves. This growth includes a recent acquisition of 130 BTC, following a brief hiatus in purchasing. While Saylor has historically advised against selling bitcoin, the firm”s necessity to pay dividends has prompted a strategic pivot.
The company”s current mNAV stands at 1.13. In response to the news of the reserve and potential bitcoin sales, MSTR shares have seen a decline of over 8%, trading below $163 per share, significantly down from its all-time high of $543 last year. Meanwhile, bitcoin”s price has experienced a nearly 32% decrease since reaching an all-time high of over $126,000 in October.
Despite fears regarding potential bitcoin sales, a prediction market operated by Decrypt”s parent company indicates that the likelihood of such a sale occurring before year-end is relatively low, at just 6%.
