Strategy May Sell Up to $1.25 Billion of Bitcoin to Bolster Liquidity
Summary
- Strategy said it has unveiled a capital-management plan that would allow it to sell up to $1.25 billion of Bitcoin to strengthen cash reserves.
- The funds raised under the plan may be used for preferred-share dividends, interest payments, and repurchases of company securities including MSTR common stock and STRC preferred shares.
- The larger dollar reserve and the 12% dividend-rate increase eased liquidity concerns, but the potential for a large-scale Bitcoin sale has emerged as a new source of selling pressure.
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Strategy, the public company with the largest Bitcoin holdings, has outlined a capital-management plan that would allow it to sell as much as $1.25 billion of the cryptocurrency. The move is aimed at strengthening cash reserves to cover preferred-share dividends and interest costs, while preserving flexibility to repurchase its own securities depending on market conditions.
Crypto media outlet Decrypt reported on June 29 that Strategy unveiled its Digital Credit Capital Framework that day. The plan includes a provision allowing the company to sell Bitcoin from its holdings when needed to build cash reserves.
Under a Bitcoin monetization program approved by Strategy's board, the company can sell up to $1.25 billion of Bitcoin from time to time to secure cash reserves. The proceeds may be used for preferred-share dividends, interest payments, and repurchases of company securities, including common stock and preferred shares.
Strategy Chairman Michael Saylor said in a statement that the company continues to maintain Bitcoin as its primary treasury reserve asset. At the same time, he added, digital credit requires liquidity, discipline and active capital management.
Strategy has increased its dollar reserves to $2.55 billion, equal to 17.4 months of preferred-share dividends and interest costs. The company said it plans to maintain reserves covering at least 12 months.
Alongside the announcement, the dividend rate on STRC preferred shares was raised to 12%. Strategy also established buyback programs of up to $1 billion each for MSTR common stock and digital credit securities.
Decrypt described the plan as a capital-management measure introduced as pressure builds on Strategy's core preferred-share products. The company is maintaining its long-term Bitcoin holding strategy while managing the cash liquidity needed to cover dividends and interest costs.
News of the larger dollar reserve and increased dividend capacity initially eased concerns about Strategy's liquidity. But the possibility of selling up to $1.25 billion of Bitcoin shifted market attention back to potential selling pressure.
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.