Strategy, a digital asset treasury (DAT) company, has abandoned its principle of never selling Bitcoin and sold off a record 330 billion won worth of the cryptocurrency to secure liquidity. The move came as the company could not withstand cash pressure from a sharp drop in Bitcoin prices, driven by a recent shift of risk-asset investment funds toward artificial intelligence (AI)-related stocks in the equity market and rising odds of a Federal Reserve rate hike within the year.
On Monday, Strategy disclosed to the U.S. Securities and Exchange Commission (SEC) that it sold 1,363 Bitcoin at an average of $59,256 from Nov. 29 to 30, and 2,225 Bitcoin at an average of $60,773 from Dec. 1 to 5. Michael Saylor, chairman of Strategy, said on X (formerly Twitter) that the company "invested $216 million (about 330.8 billion won) to pay dividends on digital credit securities."
Notably, Strategy's selling price this time drew attention as it was well below its average purchase price of $75,476. This means the company took a loss of more than $15,000 per Bitcoin in the sale. Strategy said it recorded a loss of $8.32 billion in digital assets alone in the second quarter.
Strategy's massive Bitcoin sell-off was aimed at paying dividends on its high-yield preferred stock (STRC), which carries an annual yield of up to 12 percent, and at replenishing cash reserves. In particular, as Bitcoin prices fell sharply, dropping to $59,000 on Dec. 1, the company's cash liquidity to pay interest on outstanding debt is analyzed to have declined. The current Bitcoin price is only about half of the all-time high of $126,210 recorded on Oct. 6 last year.
Until now, Strategy had maintained Chairman Saylor's business principle of "buying Bitcoin and never selling it." The only prior instance of Strategy selling Bitcoin was on Dec. 22, 2022, when it temporarily sold 704 Bitcoin to offset corporate tax losses. This transaction, the largest-ever sale of Bitcoin at a discount, is evidence of just how urgently the company needed to secure liquidity.
Originally starting as MicroStrategy, an enterprise data analytics software company, Strategy began incorporating Bitcoin into its corporate treasury assets in 2020 and then indiscriminately purchased the cryptocurrency through cash, convertible bonds (CBs), and high-yield preferred stock. It also changed its business model to issuing bonds or high-yield preferred stock backed by Bitcoin's volatility and using the proceeds to buy more Bitcoin.
To date, its cumulative Bitcoin purchase amount alone reaches $63.69 billion. Thanks to this, its stock price rose more than 300 percent in both 2023 and 2024, and its cumulative return has exceeded 2,000 percent since 2020. Having become the company holding the most Bitcoin since 2021, Strategy dropped "Micro" from its name in February last year, declaring it would become a company centered on Bitcoin investment.
The situation reversed as Bitcoin prices plunged despite President Donald Trump's policy to promote cryptocurrency. As its stock price fell 75 percent over the past year, the path of issuing new stock—the so-called "rollover" tool used to pay dividends and interest—became blocked.
Strategy sold 32 Bitcoin in portions from May 26 to 31 this year when it ran short of dollar cash to pay the first regular dividend on its newly issued high-yield preferred stock. It later declared a policy shift on June 29, saying it might sell up to $1.25 billion worth of Bitcoin to cover dividends and unpaid bond interest. It also expressed its intention to repurchase up to $1 billion each of preferred and common stock. By buying back its own shares at a discount and selling Bitcoin when the appeal of newly issued stock declines, the company has newly defined cryptocurrency not only as an investment target but also as a funding means.
With this additional sale, Strategy's Bitcoin holdings fell from 847,363 as of Nov. 22 to 843,775. Earlier, Strategy recorded a book net loss of $4.23 billion on revenue of $477.23 million last year due to falling Bitcoin prices. In the first quarter of this year, it recorded a record loss of $12.8 billion on revenue of $124.3 million. Wall Street has diagnosed that Strategy stands on the test bed of leveraged finance, in which it can explosively increase unrealized book profits if Bitcoin prices rise, but in the opposite case bears an enormous burden of maturing bonds. Strategy currently maintains cash holdings of $2.55 billion.
JPMorgan said, "The mere fact that the giant whale that had single-handedly supported Bitcoin market demand gave a signal that it 'may sell at least occasionally' has placed enormous downward pressure on investor sentiment," adding, "A two-way position of both buying and selling Bitcoin has created unnecessary risk."
