This article is from: Bankless

Translation | Odaily Planet Daily; Translator | Azuma

Strategy disclosed on July 7 that the company sold 3,588 BTC between June 29 and July 5, worth approximately $216 million.

This fund was used to pay dividends for STRC and to supplement the previously used US dollar reserves for paying dividends (USD Reserve). Despite completing this sale, Strategy stated that its complete $1.25 billion reserve-building capacity remains valid.

Odaily note: In last week's disclosed "self-rescue plan," Strategy mentioned that it had authorized the company to sell BTC to build up to $1.25 billion in US dollar reserves.

In other words, the $216 million worth of BTC sold by Strategy to replenish reserves does not count towards the previously disclosed reserve-building capacity.

Strictly speaking, there is a technical distinction between the two: one is "replenishing," and the other is "building." However, in reality, both types of sales ultimately flow into the same reserve pool for the same purpose, just categorized for different uses.

From another angle, the previously disclosed "monetization plan" (BTC Monetization Program, which is about selling coins) has never limited Strategy to only selling $1.25 billion worth of Bitcoin; it only restricts one of the funding pools—specifically, selling BTC to "build" the US dollar reserves.

This plan also allows Strategy to sell BTC for other purposes, which is precisely what we are seeing now.

Three Funding Pools

On June 29, after weeks of pressure on MSTR and STRC, Strategy launched the aforementioned BTC "monetization plan" as part of its larger "Digital Credit Capital Framework."

This plan allows Strategy to sell Bitcoin and actually mentions three main purposes:

• First, building the reserve, up to $1.25 billion in BTC can be sold to build US dollar reserves (USD Reserve);
• Second, covering the preferreds, that is, selling BTC to cover Strategy's fixed dividend and interest obligations on its preferred stock and debt. If management believes that "selling BTC is more beneficial than issuing common stock," they can also replenish the reserves previously used to cover these obligations through selling BTC.
• Third, funding buybacks, that is, selling BTC to buy back up to $1 billion in preferred shares and up to $1 billion in MSTR common stock. Additionally, the proceeds from BTC sales may also be used to cover related taxes, fees, and other expenses.

At that time, the entire market discussion focused on the $1.25 billion limit of the first funding pool, but the actual situation is far from that.

Focusing on the third funding pool actually adds an additional $2 billion in sale capacity, so calculating only the parts that have clear limits, the scale of BTC selling designed by Strategy now exceeds $3 billion, and this does not include the pool of funds used for paying dividends, interest, and replenishing reserves—this part currently does not disclose any clear limit.

Building versus Replenishing

This is where it gets truly subtle.

The purpose of the US dollar reserves (USD Reserve) is to fulfill these preferred stock dividends and debt interest obligations. Under the current policy framework, they cannot be used for stock buybacks.

As of June 28, Strategy's US dollar reserves amounted to $2.55 billion, enough to cover the company's annual debt and preferred stock payment obligations of approximately $1.76 billion, roughly equivalent to a 17-month safety period. The minimum requirement set by the Strategy board is to maintain a 12-month coverage level unless approved by the board to lower this standard.

This is also why the distinction between "building reserve" and "replenishing reserve" is worth attention.

• Selling BTC before paying dividends adds cash to the reserves: this is defined as "building."
• Using reserves to pay dividends, then selling BTC to replenish the reserves: this is defined as "replenishing."

The plan views the two as different categories, but they essentially do the same thing—convert BTC into cash to cover preferred stock dividends and interest expenses.

These details have been disclosed in documents, but the recent sale clarifies the difference in this classification further. Strategy sold $216 million worth of BTC to pay dividends and replenish reserves, while still announcing that its $1.25 billion reserve-building capacity remains intact.

Now, the market needs to start understanding Strategy's "special language": "building" and "replenishing" are essentially just accounting classifications, but they determine whether Strategy's BTC sales will take up the "public quota" that the market perceives.

From Hoarding to Active Capital Management

In the announcement on June 29, Michael Saylor stated that the framework reflects Strategy's need for "liquidity, discipline, and active capital management."

Strategy CEO Phong Le was even more direct, stating: "Strategy is shifting from a one-way capital issuance model to an active capital management model."

As Castle Island’s Matt Walsh and Jeff Dorman explained in a podcast last week, Strategy has gradually transformed into an actively managed hedge fund.

The narrative surrounding Strategy used to be very simple: Sell MSTR stock → Buy Bitcoin → Provide investors with leveraged BTC exposure, but now the logic has changed.

Now, Strategy is buying and selling different components of its capital structure to manage the stress relationships between common stock (MSTR), preferred shares, US dollar reserves, and Bitcoin assets (BTC).

This dynamic has also introduced new conflicts of interest, Walsh and Dorman pointed out:

• Selling common stock can support preferred stock dividends but will depress the premium of MSTR relative to its held BTC value;
• Selling Bitcoin can extend cash flow duration but further undermines the core narrative of "never selling";
• Supporting the preferred stock system can maintain market confidence but depletes cash reserves;
• Cutting preferred stock dividends can protect liquidity but may lead to a collapse in preferred stock prices.

The so-called "reserve loophole" is one reflection of this transition. Now, Bitcoin is no longer just an asset that Strategy uses to continue accumulating but has become a balance-sheet lever to maintain the operation of the preferred stock system.

What Will We Ultimately See

Now, investors must evaluate whether Saylor has the capability to operate such a "machine"—every adjustment of some leverage within the capital structure will help one part while potentially threatening another part.

This is exactly the most noteworthy conclusion following the disclosure of the document on July 6. Strategy does not lack options. It may have more operational space than what's superficially visible to the market.

Please do not mistakenly believe that the $1.25 billion limit represents the total cap on Strategy's Bitcoin sales.

Now, Strategy has become an institution that requires the market to re-understand. Now, every specific terminology has become more important:

• Build;
• Replenish;
• Issue;
• Repurchase;
• Defend;

Just like Federal Reserve observers meticulously analyze every punctuation in each policy statement, the market must dissect every term used by Strategy to assess what it signifies for future BTC sales.

By launching this plan, Strategy has secured greater flexibility for itself, but the underlying contradictions still exist. This is no longer a simple "leveraged Bitcoin trade," but has transformed into a bet on the capacity for active capital management.

Can Strategy continue to effectively "sell BTC," "replenish reserves," "issue securities," "repurchase stock," and "maintain the capital structure," while ensuring that any one of these processes does not undermine the others?

Personally, I am not willing to place a bet on that.

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