CryptoQuant Warns Strategy to Halt Bitcoin Purchases Under Current Conditions

CryptoQuant has warned that the cash cushion backing Strategy’s STRC preferred stock has weakened sharply, falling from roughly seven years of dividend coverage to about 14 months. At the same time, heavy Bitcoin accumulation near market peaks has left the company with an estimated $10.6 billion in unrealized losses.

The on-chain analytics firm argues that Strategy (MSTR) should pause Bitcoin purchases, rebuild its cash reserves, and adopt a more disciplined, cycle-aware buying strategy, according to a Wednesday report shared with CoinDesk.

The stress is most evident in STRC, Strategy’s flagship preferred stock, which recently declined to around $82.50—about 17.5% below its intended $100 par value—signaling strain in an instrument designed to trade near face value.

STRC pays an 11.5% dividend yield, and its weakness has coincided with Bitcoin’s broader correction and tightening liquidity across Strategy’s balance sheet.

CryptoQuant highlighted a sharp deterioration in liquidity, noting that Strategy’s cash reserves have fallen 38% since early 2026, while annual dividend obligations have risen to roughly $1.2 billion.

As a result, dividend coverage—how long reserves can fund payouts—has collapsed from more than seven years to around 14 months. A major driver was Strategy’s $1.5 billion spent in May to repurchase convertible notes, which significantly reduced available liquidity.

At the same time, ongoing issuance of STRC to fund additional Bitcoin buying has pushed obligations higher, with annual dividends rising from about $300 million at the start of 2026 to $1.2 billion today.

CryptoQuant estimates Strategy would need to rebuild reserves to roughly $2.8 billion—about 24 months of coverage—to stabilize the structure. The company currently holds around $1.1 billion in cash.

Despite its large Bitcoin holdings, CryptoQuant argues the balance sheet provides less protection than its headline size implies.

It estimates Strategy is sitting on about $10.6 billion in unrealized losses, with Bitcoin purchases from 2024–2026 now underwater. Any forced liquidation at current prices, it warns, would crystallize losses and erode shareholder value.

However, it adds that a near-term forced sale is unlikely. Strategy is not required to sell Bitcoin to support STRC and can instead rely on dividend adjustments or equity issuance—tools it has already used.

CryptoQuant’s main recommendation is for Strategy to temporarily halt Bitcoin accumulation, rebuild its cash buffer, and only resume buying under a more structured, timing-based approach rather than continuous deployment of capital.

It also notes that STRC dividends are cumulative, meaning missed payments must eventually be made up, making suspension unlikely due to reputational risk among preferred investors.

The report is more cautious than Benchmark-StoneX’s recent analysis, which dismissed comparisons between STRC and Terra’s collapse and instead described Strategy’s model as strained but not fundamentally broken.

Overall, CryptoQuant’s view would represent a major departure from Strategy’s long-standing approach. The company has steadily accumulated Bitcoin, building a position of roughly 847,000 BTC, with Michael Saylor’s strategy centered on continuous buying. A pause to rebuild liquidity would stabilize STRC but materially change that identity.