Strategy Takes Defensive Stance: $1.44 Billion Cash Reserve & Revised Bitcoin Outlook

In a significant strategic shift, Bitcoin investment giant Strategy (NASDAQ: MSTR) and its Executive Chairman Michael Saylor announced on Monday the establishment of a substantial $1.44 billion cash reserve. This proactive measure aims to mitigate potential liquidity pressures and ensure the stable payment of preferred stock dividends, directly addressing external scrutiny regarding the company’s potential need to sell Bitcoin to cover these obligations.

This move marks a notable departure for the enterprise, historically renowned for its “ALL IN Bitcoin” strategy. Amidst the cryptocurrency’s often-volatile price movements, Strategy is now embracing a more defensive financial posture.

A Proactive Financial Pivot

According to an official press release, the considerable reserve fund was primarily generated from the sale of common stock last week. The initial plan allocates sufficient cash to cover all preferred stock dividends for the next 12 months. Strategy also committed to continuously replenishing this reserve, with an ultimate goal of maintaining coverage for over 24 months of dividends.

Phong Le, Strategy’s CEO, confirmed that the current reserve level is robust enough to cover approximately 21 months of dividend payments.

Recalibrating Expectations Amid Bitcoin Volatility

The strategic adjustment comes against a backdrop of Bitcoin’s recent performance falling short of expectations. As of yesterday evening, the cryptocurrency briefly dipped below $84,000, a stark contrast to the company’s earlier optimistic forecast of Bitcoin soaring to $150,000 by year-end.

In response to these market realities, Strategy has simultaneously revised its full-year financial guidance and key performance indicators (KPIs):

Revised Financial Outlook for FY2025

• Lowered Profit Expectations: Assuming a year-end Bitcoin price between $85,000 and $110,000, Strategy now projects its full-year net profit to range from a loss of $5.5 billion to a gain of $6.3 billion. This represents a significant downward revision from the original optimistic forecast of $24 billion in net profit.
• Reduced “Bitcoin Yield” Target: The full-year target for “Bitcoin Yield” has been adjusted from an initial 30% down to a range of “22% to 26%.”
• Halved “Bitcoin Dollar Gain” Target: The company’s target for full-year Bitcoin dollar gains has been substantially cut from $20 billion to a new range of “8.4 billion to $12.8 billion.”

Shifting Capital Allocation Strategy

Notably, despite raising $1.478 billion through stock sales last week, the vast majority of these funds were channeled directly into the “USD cash reserve,” rather than being fully deployed into Bitcoin acquisitions as had been Strategy’s historical practice.

Strategy reported that between November 17 and November 30, it utilized only $11.7 million to acquire 130 Bitcoins, at an average cost of $89,860 per coin.

Strategy’s Current Bitcoin Holdings

As of the latest update, Strategy holds a total of 650,000 Bitcoins, valued at approximately $56 billion. The company’s total invested cost stands at $48.38 billion, with an average cost basis of $74,436 per Bitcoin.