The end of the year appears to be on a downward trend for Bitcoin, which has now settled below the $90,000 mark. This situation is clearly forcing Strategy to bolster its dollar cash reserves in preparation for a “prolonged crypto winter.”
Strategy is accumulating USD to prepare for a “prolonged crypto winter”
Like many Digital Asset Treasuries (DATs) at present, Strategy is taking steps to address the decline in Bitcoin and, as a result, the increased returns promised to holders of its MSTR shares, given that the BTC-per-share ratio (mNAV) is now well below 1.
Despite this, the undisputed leader among Bitcoin treasuries still boasts one of the largest BTC holdings 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 allowed the company to conduct yet another fundraising round at the end of last week, through a sale of common stock, raising $748 million. The goal? To bolster its corporate cash reserves with U.S. dollars while halting its BTC acquisitions during the holiday season.
As a result, Strategy now holds a strategic USD reserve estimated at $2.19 billion. This is very good news according to analysts at investment bank TD Cowen, as it will allow the company founded by Michael Saylor to bolster its operational capacity in anticipation of a “prolonged crypto winter.”
Exaggerated concerns about the strength of Strategy’s balance sheet
Clearly, Strategy aims to reassure its investors and creditors by accumulating enough dollars to build a “liquidity cushion” capable of covering its obligations—including dividend payments 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 asserting that “concerns about the strength of Strategy’s balance sheet are exaggerated.”
This move underscores the strength of the company’s balance sheet and should alleviate concerns regarding its ability to continue operations, even in the event of a prolonged crypto winter. Bolstering liquidity during times of stress is always prudent, and we believe all of Strategy’s stakeholders stand to benefit significantly.
In its report, TD Cowen estimates that Strategy will continue purchasing Bitcoin over the next few years, to the point of holding 835,000 BTC by the end of 2027. This accumulation strategy allows the bank to forecast “an intrinsic value of Bitcoin of approximately $380 per share within a year, and $515 per share within two years.”
