In its latest report, Grayscale stated that if the trading price of Strategy's preferred stock, STRC, continues to fall below expected levels, the company may need to increase dividends paid to investors. This would increase cash outflows and raise the likelihood of future capital injections through the sale of Bitcoin.
STRC faces pressure leading to cash flow difficulties.
Recent market volatility has put pressure on Strategy's securities. Previously, after Strategy sold some of its Bitcoin, the price of BTC also fell, prompting the market to reassess the risks associated with the company's continued high-leverage Bitcoin accumulation.
Grayscale points out that if STRC prices weaken, the company may be forced to increase its dividend payout to maintain investor appeal. An increased dividend burden would also increase Strategy's cash obligations.
The report also noted that STRCs do not have FDIC or SIPC protection, and Strategy has not guaranteed the future market price or dividends of the security. These factors have increased investors' concerns about the risks associated with these products.
STRC's market capitalization has risen to $10 billion.
However, market demand once drove STRC's rapid expansion. Grayscale stated that the market capitalization of this preferred stock has risen to approximately $10 billion, more than tripling since the beginning of the year, reflecting that some investors are still pursuing higher returns and hoping to gain exposure to Strategy's Bitcoin business model.
Corporate cash holdings are showing divergence.
While Grayscale warns of increased short-term risks, it believes that in the longer term, this change may not be entirely negative for Bitcoin. The report states that if Bitcoin gradually moves off highly leveraged balance sheets and is distributed across more corporate treasuries, the market structure could become more robust.
Corporate Bitcoin holdings have varied among companies. Strategy opted to reduce its Bitcoin holdings, while Strive Inc. continued to increase its position. The company disclosed that it purchased an additional 2,500 BTC between May 23 and June 1, bringing its total holdings to 19,000 BTC.
Institutional opinions remain divided.
There is no consensus among institutions regarding the future trajectory of Strategy. Grayscale anticipates a recovery in Bitcoin's price over the next few months, but also points out that some crypto assets driven by regulatory developments may outperform Bitcoin in the short term.
Unlike Grayscale, Standard Chartered recently stated that Bitcoin prices are nearing a temporary bottom and maintained its year-end target of $100,000. The bank believes Strategy may resume a more aggressive pace of Bitcoin accumulation, comparing this assessment to the company's historical performance of selling and then buying back Bitcoin in 2022.
Additional information:As of the time of this report, Bitcoin was trading at $63,560, down 2.5% in the last 24 hours.
