Bitcoin Giant Strategy establishes a reserve of $1.44 billion USD, but can still sell BTC

Bitcoin treasury company Strategy has created a $1.44 billion dollar reserve as a means to provide “very smooth, continuous dividends” even if Bitcoin is in trouble.

While this appears to provide a cushion to prevent the company from selling off part of its 3.1% stake in the total Bitcoin supply, Strategy isn’t ruling out the possibility of having to sell BTC – with the company’s CEO mapping out what the future could look like if that were to happen.

Strategy formed the USD reserve by selling MSTR shares over the past nine days, CEO Phong Le revealed in a December business update. The company aims for a dividend payment of at least 12 months, with the ultimate goal of expanding this reserve to a dividend payment of more than 24 months.

“Bitcoin is volatile, and what we want to do is provide a digital credit product to investors who are volatility adverse, and we want to assure them that Bitcoin volatility will never impact their dividends,” Strategy co-founder and executive chairman Michael Saylor said on the call. “And to do that, we added a U.S. dollar reserve.”

The move follows Le’s saying on the “What Bitcoin Did“ podcast last week that Strategy would sell its Bitcoin if its market-adjusted net asset value, or mNAV, fell below 1 — meaning the company is valued lower than the value of the assets it owns. In the latest company update call, Strategy didn’t shy away from the claim, but rather doubled down on it.

“There are skeptics and cynics who believe that we can’t, won’t, or won’t sell Bitcoin to fund the dividends, and that sometimes becomes a negative short story. I think it’s important for us to dispel this idea,” Saylor said.

“Not only can the company sell Bitcoin to pay out the dividends, the company can actually sell highly valued Bitcoin, pay out the dividends, and then continue to grow its Bitcoin holdings every quarter forever,” he added.

Strategy became the leading treasury company for digital assets after exiting its intelligence software solutions business in 2020. It now has a reserve of 650,000 BTC, worth about $56 billion, or about 3.1% of the total Bitcoin supply. That total includes 130 BTC purchased in the past week, after the company made no purchases the week before.

During this period, Saylor publicly stated that you “never sell your Bitcoin‘- but his approach seems to have changed.

This is because the Bitcoin Treasury company’s business model relies on paying dividends to its holders. The main way to raise money to pay these dividends is by issuing common stock; However, the company said in the call that this only makes sense if it is above an mNAV of 1. Once the mNAV drops below this level, it will consider selling Bitcoin or Bitcoin derivatives. If Strategy doesn’t want to do any of this, it will use its new USD reserve to close the gap.

“[The] The ultimate goal is to have at least 24 months of dividends in US dollars, so that even in the event that we cannot or do not want to issue shares, or we do not want to sell Bitcoin, we can use the USD reserve to last us two years of dividend payments,” Le explains.

In response to the announcement, MSTR has fallen more than 8% to a recent price of less than $163 per share, according to Yahoo Finance. It is down 70% from its all-time high of $543 last year, while Bitcoin is down nearly 32% to around $85,500 since hitting an all-time high above $126,000 in October, according to Coin gecko. Strategy’s mNAV is 1.13, according to the report website.

Despite growing fears that Strategy might sell Bitcoin, users continue to move on Myriad—a prediction market operated by DeclutterDastan’s parent company,believe there is a slim 6% chance of this happening before the end of the year.