- Strategy claimed it has 71 years to sustain its debt-fueled Bitcoin playbook, even if BTC stagnates at its current price.
- Expert analysts doubt the sustainability of the company’s treasury scheme amid BTC’s risk of lower dips.
Bitcoin (BTC) resumed its downward spiral last week. After a series of breaks in its key supports, it dived to $83K on the weekend, a price it last saw in April this year before a series of rallies culminating in its all-time high at $126K in October.
Last Monday, Strategy’s (formerly MicroStrategy) average purchase price for its 649,870 BTC holdings was already at $74,433 per BTC. The drop to $83K on Saturday has thinned its margin to less than $10K, keeping MSTR investors worried and critics sounding the alarm on further sell-offs.
The company’s mNAV (Market Net Asset Value) remained at a premium. Nevertheless, its decline to 1.18 as of Saturday prompted some pundits to warn the public that the stock is edging closer to a discount.
Strategy, given its status as the largest Bitcoin holder among other publicly traded digital asset treasury (DAT) companies, has been in the crosshairs of the old guard in traditional finance and anti-crypto sentiment as BTC’s price dipped. They questioned its capability to sustain its debt-fueled Bitcoin playbook.
Can Strategy Sustain Dividend Payments to Investors?
Amid the doubts, the company reassured investors that it had 71 years of dividend protection. This meant it could pay all its shareholders within that period, even if the BTC price stagnates at current levels.
However, Web3 and crypto experts like Freedx Chief Business Officer Anton Golub dismantled Strategy’s claim. According to him, the company cannot achieve such dividend coverage unless its Executive Chairman, Michael Saylor, destroys shareholders and nukes MSTR.
Currently, Strategy has five products with high-yield offers to investors:
- STRK with 8% yield
- STRF with 10% yield
- STRD with 10% yield
- STRC with 10% yield (up from 9%)
- STRE with 10% yield in euros
Golub highlighted that all these require up to $700 million in annual payments to investors.
If Strategy maintains its conviction of not selling any of its Bitcoin holdings to pay dividends, the only options left would be to issue more MSTR shares to the point of diluting shareholder value or raise more money from new investors. The business is already employing the former to generate funds, while the latter amounts to a classic Ponzi scheme.
Strategy Losing Its Spot in Nasdaq 100 Index
Strategy is still licking its wounds from the ongoing crypto bloodbath. But then again, another event could set it back.
Adding salt to Strategy’s wound is the upcoming Nasdaq 100 annual rebalancing in December. The wind-down in MSTR’s market cap could risk the company’s spot in the index.
If that happens, tens of billions in passive flows could automatically dump. As a result, institutions looking to derisk could amplify Strategy’s freefall, which could further trickle down to BTC’s price.
