What to know:
- Strategy has paused Bitcoin purchases for four consecutive weeks, keeping its holdings unchanged at 843,775 BTC.
- Michael Saylor’s latest cryptic X post fueled speculation, but the company announced no new Bitcoin acquisition.
- Strategy boosted its cash reserves to about $3.23 billion by selling 2.73 million MSTR shares instead of buying more BTC.
Strategy, the largest corporate holder of Bitcoin, has gone four straight weeks without buying more BTC. This is the longest stretch that Strategy has not purchased any BTC in almost two years. This is happening at a time when Strategy is building its cash position ahead of the second-quarter earnings report.
The most recent tweet from Michael Saylor on X once again set the tone for another possible purchase of Bitcoin by Strategy. However, it did not happen as expected.
Michael Saylor’s Latest Post Sparks Bitcoin Buying Speculation
On Sunday, July 26, Strategy Executive Chairman Michael Saylor posted a graph of Bitcoin purchases made by the company on X, stating, “We’re gonna need another color.” This cryptic post drew thousands of comments in anticipation of another Bitcoin purchase on Monday.
Michael Saylor’s Sunday posts had for many years been followed up by an SEC filing showing another purchase of Bitcoin. Recently, however, this trend has been altered.
Saylor had made a similar post a few days ago, but instead of making another purchase of BTC, Strategy decided to sell a large quantity of it.
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Strategy Holds 843,775 BTC Without New Purchases
The company has already made 113 investments in Bitcoin through its strategy for the treasury. The firm currently holds 843,775 BTC that have been purchased at an average cost of $75,476 per Bitcoin and a total investment amounting to $63.69 billion.
At the current market value of $65,373.96 per BTC, the investment is now worth around $55.1 billion, placing the investment $8.6 billion short of its total purchase.
Furthermore, the firm has also come under valuation pressure. In particular, the firm’s mNAV has declined below 1 since the end of June. This implies that its market capitalization is now lower than the capitalization of the Bitcoin it owns. Hence, it is less appealing to issue shares to purchase more Bitcoin.
Company Builds Cash Instead of Buying More Bitcoin
Instead of buying additional Bitcoin, Strategy has chosen to improve its cash balance.
During July 13-July 19, the firm disposed of over 2.73 million MSTR shares, fetching the firm about $263.5 million in net proceeds. Based on its filing dated July 20 with the SEC, Strategy’s cash balance has been boosted to around $3.225 billion.
Despite that, it should be noted that Strategy can dispose of an additional $23.53 billion worth of common stock under its existing at-the-market programs.
This year, Strategy took measures for capital management aimed at increasing financial flexibility, namely, a $1B buyback of digital credit securities, a $1B common stock buyback program, and an approval to sell Bitcoin worth up to $1.25B if necessary. On July 23rd, the company made some changes in its mNAV calculation, stating that data before the change is no longer comparable.
Strategy Halts Bitcoin Buying Amid Cash Pressure
The decision to halt Bitcoin purchases by the company was an earlier issue with the company’s financial status.
In June, CryptoQuant Head of Research Julio Moreno recommended that Strategy reduce Bitcoin purchases and replenish its cash reserves since he estimated that the company’s available cash had reduced drastically in the first half of the year.
Moreno further pointed out that the dividend requirements of the company have grown very much during the last six months, but the period for which its cash can meet these requirements has been reduced drastically. Moreno opined that future acquisitions of Bitcoins should be made on an investment philosophy and not on an automatic basis.
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