The end of the year seems to be on a downward trend for Bitcoin, which is now trading below the $90,000 level. This situation is clearly forcing Strategy to strengthen its dollar cash reserves in order to prepare for a “prolonged crypto winter.”
Strategy accumulates USD to prepare for a “prolonged crypto winter”
Like many Digital Asset Treasuries (DATs) at present, Strategy is organizing itself to cope with the decline in Bitcoin and, as a result, the increased returns promised to holders of its MSTR shares using a BTC per share ratio (mNAV) that is now well below 1.
Despite everything, the undisputed leader in Bitcoin treasuries still benefits from one of the largest BTC stocks in the world, with 671,268 units on the books, estimated at just over $58.5 billion based on the BTC price at the time of writing.
This was enough to proceed with yet another fundraising round at the end of last week, through a sale of common shares, to raise $748 million. The goal? To strengthen its corporate cash reserves with US dollars while halting its BTC acquisitions during the holiday season.
As a result, Strategy now has a strategic reserve of US dollars estimated at $2.19 billion. This is very good news according to analysts at investment bank TD Cowen, as it will enable the company founded by Michael Saylor to strengthen its operating capacity in anticipation of a “prolonged crypto winter.”
Exaggerated concerns about the strength of Strategy’s balance sheet
Clearly, Strategy wants to reassure its investors and creditors by accumulating enough dollars to build a “liquidity cushion” that will enable it to cover its obligations—paying dividends on its preferred shares and interest on its outstanding debt—over an estimated period of approximately 32 months.
This should be enough to weather potentially difficult market conditions, according to estimates by TD Cowen analysts in a report published earlier this week, to the point of stating that “concerns about Strategy’s balance sheet strength are overblown.”
This initiative underscores the strength of the company’s balance sheet and should alleviate concerns about its ability to continue operations, even in a prolonged crypto winter scenario. Consolidating liquidity in times of stress is always prudent, and we believe that all of Strategy’s stakeholders come out significantly ahead.
In its report, TD Cowen estimates that Strategy will continue to purchase Bitcoin over the next few years, to the point where it could hold 835,000 BTC by the end of 2027. This accumulation strategy allows it to forecast “an intrinsic value of Bitcoin of approximately $380 per share within a year, and $515 per share within two years.”
