Written by: Allard Peng
Compiled by: AIdidiaoJP, Foresight News
Strategy's (formerly MicroStrategy) U.S. dollar cash reserves have surged to $4.65 billion, compared to $3.75 billion just two weeks ago. Meanwhile, since the end of June 2026, it has sold close to 7,000 Bitcoins.
This number caused an uproar across the crypto space. Why is a company that has 'hoarding Bitcoin' written into its DNA, with almost all its assets pledged to BTC, suddenly starting to hoard fiat currency on a large scale? More crucially, should other Bitcoin treasury-related companies follow suit?
This is not a simple question of 'should' or 'shouldn't'. It involves credit ratings, capital structure, opportunity costs, volatility risks, and the true business model positioning of Bitcoin companies. Today, we'll peel back the layers to uncover the truth.
Why is Strategy Obsessed with U.S. Dollars? Because It Took a Path Few Others Can Travel
Strategy is increasingly looking less like a traditional software company and more like a 'digital credit' issuance platform. The preferred securities it issues are essentially backed economically by its massive Bitcoin balance sheet. These securities carry fixed U.S. dollar dividend obligations—dividends must be paid in U.S. dollars on time, regardless of Bitcoin's price movements.
Here's the problem: Bitcoin itself generates no cash flow. Strategy's software business still exists, but the cash it generates is far from sufficient to cover its increasingly large capital structure.
What's even more critical is the traditional credit analysis system. In October 2025, S&P gave Strategy a B- rating. The reasons were stated bluntly: excessive Bitcoin concentration, insufficient U.S. dollar liquidity, and extremely thin risk-adjusted capital. Under S&P's methodology, due to market volatility risks, Bitcoin is almost entirely excluded from 'effective capital'—no matter how much BTC you hold, it's essentially zero in their eyes.
When we previously analyzed this rating report, we clearly suggested that building cash reserves was one direction worth serious consideration to improve the credit rating.
Therefore, Strategy chose to hold a large amount of U.S. dollars. The purpose is pure—to support its ability to continuously issue digital credit. Greater U.S. dollar liquidity makes the preferred securities appear 'safer' in the eyes of investors and rating agencies, thereby expanding demand and lowering financing costs.
But cash isn't a free lunch. Excess capital should be generating returns. A typical company might reinvest it, buy back stock, or pay dividends. The most direct option for a Bitcoin company is to buy more Bitcoin. Every dollar of cash sitting idly on the balance sheet means you've forgone the potential positive return of Bitcoin in exchange for a guaranteed negative real return (eroded by inflation).
Strategy is willing to bear this loss because its business model is now tied to 'continuously issuing credit.' Three exceptionally specific conditions are simultaneously true:
- Bitcoin dominates almost the entire balance sheet;
- Rating agencies impose a heavy penalty for Bitcoin exposure;
- Management is explicitly committed to continuing large-scale digital credit issuance.
Each of these conditions alone is quite specific. The combination of all three creates the situation where 'hoarding cash is a must.' Conversely, if Strategy were not issuing credit, it wouldn't need these dollars at all.
The True Cost of Cash Reserves: The 'Hidden Tax' Calculated by Math
Let's get straight to the numbers and calculate the drag.
Assume Strategy issues $100 worth of preferred stock with a 10% annual dividend yield. To cover three years of dividends, it must set aside $30 in cash, leaving only $70 actually available to invest in Bitcoin.
It still has to pay $10 in dividends annually. Therefore, this $70 Bitcoin investment must generate at least:
10 ÷ 70 = 14.29%
The originally stated 10% cost of capital instantly becomes a hurdle rate of 14.29% for the actually deployed capital. The cash reserve directly raises the required return by 42.9%.
The cash itself earns a little interest, slightly mitigating this number, but the structural drag doesn't disappear.
The true hurdle is actually higher. Bitcoin is highly volatile; some years it will significantly underperform this 14.29%. But dividends cannot be skipped (assuming no default). So, in addition to the 'cash drag,' there's an extra layer of 'volatility drag'—you're using a high-volatility asset to amplify leverage for paying fixed obligations. This risk must be compensated for by raising the hurdle rate even further.
The result is harsh: the larger the required cash reserve, the smaller the proportion of each new dollar that can actually go into Bitcoin. If Bitcoin's long-term appreciation rate cannot consistently exceed this elevated hurdle, ordinary shareholders will ultimately foot the bill.
Of course, cash isn't completely useless. It provides real option value:
- Cover dividends and interest when Bitcoin crashes sharply, avoiding forced selling at low prices;
- Opportunistically repurchase preferred securities when their trading price is significantly below book value.
Strategy recently executed a clever move. At the end of July, it spent $25 million to buy back $28.89 million worth of STRC at a discount as high as 13.47%. It later used $108.6 million from Bitcoin sales to repurchase another 1.15 million STRC shares. Buying back preferred shares below par value is equivalent to using less cash to eliminate more senior claims and future dividend obligations. This substantially thickens the 'Net Bitcoin Per Share.'
Most Bitcoin Companies: Don't Blindly Follow Suit; Cash Needs Must Be Tied to Real Business
Now, let's zoom out to the vast majority of Bitcoin companies.
For them, cash needs should be strictly tied to the operational business itself, not arbitrarily set as a 'reserve target.' It's worth knowing that even Strategy itself isn't sure how much cash it needs to hoard to get a better rating or attract more credit investors to buy STRC.
A company with real cash flow typically understands its spending structure well: salaries, taxes, debt repayments, supplier payments, near-term capital expenditures, plus a reasonable buffer for operating cash flow fluctuations.
The buffer size depends on business stability.
- A profitable company with recurring revenue, low fixed costs, and predictable expenditures can maintain a smaller buffer;
- A business with strong cyclicality or large capital expenditures must hold more.
The only legitimate reason to increase reserves is that the business itself needs liquidity, not simply because management wants to see a large cash balance on the books.
Once operational needs and prudent buffers are covered, any excess cash must have a clear economic purpose. Otherwise, it merely creates a huge opportunity cost, directly diluting shareholder returns. Any company's excess capital should be deployed to directly compete with its own hurdle rate:
- Repurchase significantly undervalued stock;
- Repay high-cost debt;
- Or invest in projects that can generate higher returns.
For a Bitcoin company, the default high-return project is often simply continuing to hoard Bitcoin.
Conclusion: Strategy is an Extreme Exception; Most Companies Have No Reason to Hoard U.S. Dollars on a Large Scale
Stringing all the logic together, the answer is actually quite clear.
Strategy is an exceedingly rare case. Its cash reserves exist solely because it has built a large-scale digital credit issuance machine on top of a Bitcoin balance sheet, while credit rating agencies, with evident institutional inertia, treat a legal, highly liquid asset like Bitcoin as effectively zero.
Companies without this special liability structure—which is virtually all other Bitcoin-related enterprises in the market—have almost no reason to hoard U.S. dollars on a large scale beyond maintaining daily operations and a reasonable liquidity buffer.
Hoarding one more dollar in cash equals buying one dollar less of Bitcoin. Under the assumption of Bitcoin's long-term upward trend, this is exchanging a guaranteed negative real return for an uncertain sense of 'security.' For most companies, this is not a good deal.
Ultimately, the decision between cash and Bitcoin should be driven not by emotion, nor by what others are doing, but by your own business model, capital structure, and genuine cash flow needs.
