This article is from: Bankless
Compiled by: Odaily Planet Daily; Translator: Azuma
On July 7th, Strategy disclosed that it had sold 3,588 BTC, worth approximately $216 million, between June 29th and July 5th.
These funds were used to pay dividends on STRC and to replenish the USD Reserve previously used for dividend payments. Despite completing this sale, Strategy stated that its full $1.25 billion reserve-building capacity remains intact.
Odaily Note: In the "self-rescue plan" announced last week, Strategy had indicated it authorized the company to sell BTC to build a USD reserve of up to $1.25 billion.
That is to say, the $216 million worth of BTC sold by Strategy to replenish the reserve was not counted against the previously disclosed reserve-building capacity.
Technically, there is indeed a difference between the two: one is "replenishing" the reserve, and the other is "building" the reserve. In practice, however, both types of sales ultimately flow into the same reserve pool for the same purpose, merely categorized differently.
Looking at it another way, Strategy's previously disclosed "BTC Monetization Program" (selling BTC) never limited Strategy to selling only $1.25 billion worth of Bitcoin in total. It only limited one of the funding pools—selling BTC to "build" the USD reserve.
The program also allows Strategy to sell BTC for other purposes, which is precisely what we are seeing now.
Three Funding Pools
On June 29th, after weeks of pressure on MSTR and STRC, Strategy introduced the aforementioned BTC "Monetization Program" as part of its broader "Digital Credit Capital Framework."
This program allows Strategy to sell Bitcoin and essentially mentions three main uses:
- First, to Build the reserve, allowing the sale of up to $1.25 billion worth of BTC to establish the USD Reserve.
- Second, to Cover the preferreds, meaning selling BTC to pay for Strategy's fixed dividend and interest obligations on its preferred shares and debt. If management deems "selling BTC more advantageous than issuing common stock," they can also use BTC sales to replenish the reserve funds previously used for these obligations.
- Third, to Fund buybacks, meaning selling BTC to repurchase up to $1 billion worth of preferred shares and up to $1 billion worth of MSTR common stock. Additionally, proceeds from BTC sales may be used to cover related taxes, fees, and other expenses.
At the time, the entire market's discussion focused on the $1.25 billion limit of the first funding pool, but the reality is far more complex.
Looking solely at the third pool, it effectively adds an extra $2 billion in sales capacity. Therefore, even calculating only the portions with explicit caps, Strategy's currently designed BTC sale scale exceeds $3 billion. And this does not include the funding pool for paying dividends, interest, and replenishing the reserve — for which no explicit upper limit has been disclosed.
Building vs. Replenishing
This is where the nuance truly lies.
The purpose of the USD Reserve is to cover these preferred share dividend and debt interest obligations. Under the current policy framework, it cannot be used for stock buybacks.
As of June 28th, Strategy's USD Reserve stood at $2.55 billion, sufficient to cover the company's annual obligations of approximately $1.76 billion for debt and preferred shares, providing about 17 months of coverage. The Strategy board has set a minimum requirement to maintain a 12-month coverage level, unless the board approves lowering this standard.
This is why the distinction between "building the reserve" and "replenishing the reserve" warrants attention.
- Selling BTC before paying dividends and adding cash to the reserve: This is defined as "building."
- Using the reserve to pay dividends, then selling BTC to refill the reserve: This is defined as "replenishing."
The program treats these two as different categories, but they effectively accomplish the same thing— converting BTC into cash to cover preferred share dividends and interest payments.
These details were actually disclosed in the documents all along, but the sale a few days ago made the difference in classification more apparent. Strategy sold $216 million worth of BTC, using the funds to pay dividends and replenish the reserve, while simultaneously announcing that its $1.25 billion reserve-building capacity remained fully intact.
Now, the market needs to start understanding Strategy's "specialized language": "Building" and "replenishing" are essentially accounting classifications, but they determine whether Strategy's BTC sales will count against the "publicly visible quota."
From Hoarding BTC to Active Capital Management
In the June 29th announcement, Michael Saylor stated that this framework reflects Strategy's need for "liquidity, discipline, and active capital management."
Strategy CEO Phong Le was even more direct, stating: "Strategy is shifting from a one-way capital issuance model to an active capital management model."
As Matt Walsh and Jeff Dorman of Castle Island explained on a podcast last week, Strategy has effectively evolved into an actively managed hedge fund.
The old Strategy narrative was very simple: sell MSTR stock → buy Bitcoin → provide investors with leveraged BTC exposure. But the logic is now different.
Today, Strategy is buying and selling different components within its own capital structure to manage the pressures between common stock (MSTR), preferred shares, the USD reserve, and Bitcoin assets (BTC).
This dynamic also introduces new conflicts of interest. Walsh and Dorman pointed out:
- Selling common stock can support preferred share dividends but depress MSTR's premium relative to its BTC holdings.
- Selling Bitcoin can extend the cash flow runway but further erodes the core "never sell" narrative.
- Supporting the preferred share system can maintain market confidence but consumes cash reserves.
- Cutting preferred share dividends can protect liquidity but may cause preferred share prices to crash.
The so-called "reserve loophole" is one manifestation of this shift. Today, Bitcoin is no longer just an asset for Strategy to accumulate continuously; it is becoming a balance-sheet lever used to keep the preferred share system running.
What We Will Ultimately See
Now, investors must assess Saylor's ability to operate this "machine"— every time a lever in the capital structure is adjusted, it helps one part while potentially threatening another.
This is the most noteworthy takeaway after the July 6th document disclosure. Strategy is not out of options. It likely has more room to maneuver than the market superficially sees.
Do not mistakenly believe anymore that the $1.25 billion quota represents the total cap for Strategy's Bitcoin sales.
Today, Strategy has become an institution that the market needs to re-understand. Now, every specialized term becomes more important:
- Build;
- Replenish;
- Issue;
- Repurchase;
- Defend;
Just as Fed watchers meticulously analyze every punctuation mark in policy statements, the market must also deconstruct each term used by Strategy to judge what it implies for future BTC sales.
By introducing this plan, Strategy has granted itself greater flexibility, but the underlying contradictions remain. This is no longer a simple "leveraged Bitcoin trade"; it has now become a bet on active capital management capabilities.
Can Strategy consistently manage "selling BTC," "replenishing reserves," "issuing securities," "repurchasing stock," and "maintaining the capital structure," while ensuring that no single part disrupts the others?
Personally, I am not willing to place that bet.
