Original | Odaily Planet Daily (@OdailyChina)

Author｜Azuma (@azuma_eth)

After more than two months, Strategy has finally started buying Bitcoin again.

On the evening of August 31, Beijing time, Strategy announced that it had purchased a total of 4,603 BTC from August 24 to August 30, costing approximately $369.7 million, with an average purchase price of $80,318. As of August 30, Strategy holds a total of 845,050 BTC, with a cumulative cost of approximately $63.73 billion and an average holding cost of $75,412.

Meanwhile, in the same week, Strategy also did two other things — injected approximately $30 million into a "USD Cash" liquidity account; and spent about $151.8 million to repurchase 1.557 million shares of STRC. As of August 30, Strategy's "USD Reserve" is $5.1 billion, and USD cash is $1.61 billion, totaling $6.71 billion.

• Odaily Note: The difference between USD Reserve and USD Cash is that the former can only be used to pay dividends on Strategy's preferred shares and interest on outstanding debt; the latter can be used for a wider range of regular treasury purposes, including buying Bitcoin, expanding USD reserves, broader capital management purposes, and other similar uses.

Simply from a price perspective, Strategy's buy and sell operations around BTC over the past two months have been somewhat awkward — according to Lookonchain statistics, Strategy sold a total of 6,916 BTC in the past two months at an average selling price of approximately $62,081, while this recent repurchase occurred at an average price of $80,318... Strategy seems to have made a not-so-smart "low sell high buy" move.

However, if we take a step back, we find that this series of trades does not constitute a failure for Strategy as a whole; in fact, it can be viewed as quite successful. After all, Strategy's main objective in selling coins over the past two months was not to escape the peak, nor was it to predict that BTC would decline. What it truly sought to resolve was a crisis that was once more troublesome than BTC's price — the de-pegging of STRC and the cash reserve issues that it exposed.

Now, after continuously selling part of its BTC, replenishing USD reserves, adjusting the STRC mechanism, and initiating a large-scale repurchase, Strategy has finally begun to buy BTC again. To some extent, this also means that the thundercloud that had hung over Strategy for the past two months has at least been dealt with at a stage.

STRC De-pegging and Cash Reserve Crisis

For long-term investors following Michael Saylor and Strategy, everything that happened this summer was somewhat unexpected.

Over the past few years, Strategy has almost built a very straightforward and steadfast business narrative — financing, then buying BTC. Whether issuing common stock, convertible bonds, or subsequently introducing a series of preferred stock products like STRK, STRF, STRD, and STRC, Strategy's capital operations ultimately pointed to the same goal: continuously raising funds from the capital market to expand its BTC holdings.

In this system, the most important factor is not how much cash flow Strategy's software business can generate, but whether the capital market is still willing to continuously fuel this "financing machine."

However, in June of this year, the problem first appeared with STRC. As Strategy's most important floating rate preferred stock product, one of STRC’s initial core positions was to stabilize trading around $100 as much as possible. To maintain this goal's appeal, Strategy would adjust dividends and other means to keep STRC as a relatively stable financing tool, continuously absorbing funds from the market. But as STRC began to de-peg and gradually intensify, this mechanism started to face challenges.

• Odaily Note: Refer to “STRC De-pegging 11%, Can Strategy's Perpetual Machine Still Operate?”; “No Return to Peg, No Bull Market for BTC.”

For Strategy, the biggest issue with STRC's de-pegging is — once the market price stays below the issue price for a prolonged period, the company's ability to continue financing through the issuance of STRC will be significantly affected. And this precisely touches on the core aspect of Strategy's capital model.

The reason why Strategy has been able to continuously expand its BTC holdings over the past few years essentially relies on continuous financing. When financing channels like common stock and preferred stock operate smoothly, the company can continuously secure new funds and invest these funds into BTC; but once a critical financing channel fails and the company simultaneously faces ongoing cash outflows such as preferred stock dividends and debt interest, liquidity pressure will rapidly emerge.

Thus, on June 29, Strategy launched a self-rescue plan called the "Digital Credit Capital Framework." One of the core changes in this plan is that Strategy officially opened the door for "selling BTC" for the first time.

• Odaily Note: Refer to “Lightning Five Consecutive Strikes! Strategy's Self-Rescue Plan Officially Unveiled.”

According to the relevant arrangements, the company can sell part of its BTC to provide funds for preferred stock dividends, debt interest expenditures, or to replenish USD reserves when management believes that selling BTC is more beneficial than issuing common stock or conducting other capital market financing.

In other words, the previous BTC treasury that "only went in and not out" has been assigned a new function for the first time — when financing pressure emerges in the capital market, BTC itself can also become a liquidity source for Strategy.

Subsequently, Strategy officially began large-scale BTC sales — prior to this, there had already been a small-scale "desensitization" test sale of only 32 BTC.

State of Crisis Repair

Looking back, since the announcement of the "Digital Credit Capital Framework" on June 29, the main line of Strategy's operations over the past two months has actually been very clear — selling part of BTC for liquidity, continuously replenishing cash reserves through MSTR ATM, and mass repurchasing STRC to repair the de-pegging until the pressure on reserves has eased.

Regarding BTC sales, Strategy sold 3,588 BTC in the week of July 6 at an average price of approximately $58,603, totaling around $210 million; sold 1,638 BTC in the week of August 3 at an average price of approximately $61,660, totaling around $101 million; and sold 1,690 BTC in the week of August 10 at an average price of approximately $64,260, totaling around $108.6 million. In total, Strategy sold 6,916 BTC, cashing out approximately $430 million.

However, selling coins is just part of the entire self-rescue plan. Over the past two months, the primary source of Strategy's funds has remained the sale of MSTR's ATM. By continuously selling common stock, the company increased its USD reserves from $2.55 billion on June 29 to $5.1 billion; simultaneously, in late August, a USD cash account was established, which reached $1.61 billion as of August 30. The two parts of USD assets combined reached $6.71 billion, an increase of approximately $4.16 billion compared to the end of June, growing over 160%.

At the same time, Strategy has been continuously repurchasing STRC; in the latest week, Strategy spent another $151.8 million to repurchase 1.557 million shares of STRC. Since starting the repurchase at the end of July, the company has now used approximately $635 million to repurchase STRC.

Under the triple strategy, this adjustment seems to have begun to show results.

Aside from the cash reserve situation mentioned earlier, the most obvious indicator of repair is the STRC de-pegging situation. As of the morning of September 1, when the U.S. stock market closed, STRC had rebounded to around $97, with only about 3% remaining to reach the target position of $100. Strategy's management previously explicitly stated in the Q2 earnings call that the goal is to push STRC back near $100 before September 8, and currently, it looks quite promising.

The market’s most concerning hidden danger has been phase alleviated

Of course, at this stage, one cannot directly conclude that Strategy has completely "escaped danger."

Whether STRC can successfully return to the peg before September 8 and remain stable around $100 afterward remains to be seen; Strategy's large preferred stock system still implies ongoing cash expenditures, and whether its "financing—buy coin" capital machine can operate normally in the future also depends on whether the market is willing to continue providing funds.

But at least compared to more than two months ago, Strategy has regained some of its initiative — with a significant increase in cash reserves, a noticeable narrowing of STRC de-pegging, and the company has finally shifted back to the buying side after continuous coin selling.

In summary, the operations that Strategy has conducted over the past two months can be considered a very wise "low sell high buy." Although it may seem superficially like a loss, what has been gained is over $4 billion in new USD assets, hundreds of millions in STRC repurchases, and the space for the entire capital system to adjust when STRC's de-pegging and cash reserve issues once triggered market concerns.

The huge hidden danger that hung over the market may not have completely disappeared, but at least, it is no longer as dangerous as before.

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