On May 29th, Strategy (formerly MicroStrategy) moved over 411 Bitcoins to Coinbase Prime, bringing new scrutiny to Michael Saylor’s funding model.
Arkham Intelligence data shows that there were two transfers of approximately 205.3 BTC and 206.2 BTC from Strategy-related wallets before the coins reached the destination address.
The move was not confirmed as a sale, and Strategy had previously moved coins between wallets as part of custodial management, later sparking similar speculation that it appeared to reflect an internal reorganization.
However, this remittance attracted attention because of the way the coin moved.
On-chain analyst Fordex Plouffe said the transferred Bitcoins will first leave two wallets linked to the strategy for the new address and then be moved again, a second step different from previous wallet migrations.
These previous transfers were typically stopped after the funds were moved from the MSTR-linked wallet to the new address.
The address format also stood out. According to ForeDex Proof, Strategy has historically used Coinbase Custody addresses that begin with “bc1q” and native SegWit addresses, but the latest move included addresses that begin with “3”, which is in P2SH format.
Considering this, analysts said the latter wallet appears to be related to Coinbase Prime activity commonly associated with over-the-counter trading, raising the possibility that Strategies is preparing to sell a small portion of its holdings.
Still, this BTC move was only a fraction of Strategy’s 843,738 BTC funds, but its timing made it even more important.
This comes during a week in which the company paused new Bitcoin purchases, moved to convertible bond buybacks, and told investors that selling Bitcoin could be part of its fundraising toolkit if market conditions or dividend obligations require it.
STRC Stress reduces the margin for strategic error.
The Coinbase-related transfers come as Strategy’s preferred stock structure faces pressure from declining dollar reserves and weak trading in STRC, a floating rate preferred product designed to trade near $100 par value.
Over the past few months, Strategy has used preferred stock issuance as part of a broader financing system that allows it to raise capital, buy Bitcoin, and manage debt without relying solely on common stock or convertible debt.
Market participants noted that STRC’s structure relies on market confidence, and investors must believe that the company can continue to pay dividends, maintain sufficient cash coverage and access capital markets.
Confidence in STRC has become even more fragile as it has remained consistently below par since the middle of this month.
Meanwhile, Strategy recently moved to buy back its 0% convertible notes due in 2029 with a face value of nearly $1.5 billion for about $1.38 billion in cash.
The buyback eliminated future debt and canceled the bonds at a discount, but also reduced reserves, which some investors considered a cushion against preferred dividends and interest costs.
Glenn Cameron, Global Head of Institutions at OnRamp Bitcoin, said Strategy’s dollar reserves fell from $2.25 billion on February 1 to $871 million on May 25. This decrease was approximately equal to the cash cost of convertible debt repurchases.
Mr. Cameron estimated that Strategy’s annual cash liability was about $1.66 billion, including preferred dividends, convertible debt and the burn of its software business. He said STRC alone accounts for approximately $1.23 billion of this total at a dividend rate of 11.5%.
Based on this estimate, Strategy’s remaining dollar reserves are equivalent to approximately 6.3 months of annualized debt. Mr Cameron said the reserve was offered to STRC members as covering preferred dividends and interest on debt for approximately two-and-a-half years, before convertible bond buybacks reduce the cash cushion.
These numbers further raise concerns about the company’s financial structure. If STRC remains below par, Strategy may need to increase its dividend rate to restore demand, and each increase will be applied to the entire outstanding stack of STRC, increasing the company’s future cash burden.
Cryptocurrency analyst Ragnar said Strategy needs to replenish its cash reserves as soon as possible, arguing that STRC’s weakness may reflect investors’ concerns about shrinking coverage ratios.
He cited purchases of 220 BTC at $123,561, 430 BTC at $119,666, and 6,220 BTC at $118,940 as potential candidates if the strategy chooses to reduce its exposure on margin, and said the company could sell high-cost Bitcoin lots to rebuild cash.
This theory would be consistent with the logic of a tactical sale without changing Strategy’s extensive holdings. Selling higher-cost coins could potentially raise cash and reduce the company’s average cost base while keeping much of its finances intact.
It would also mark a tangible change in the way investors understand Saylor’s Bitcoin strategy. Even a limited sale would demonstrate that some coins can support capital stacks in times of tight market conditions.
The strategy faces a four-month grace period.
Joanne Wesson, chief executive officer of AlphaRactal, said the pressure reflected a deeper issue around the strategy’s accumulation timing.
He argued that companies with such large Bitcoin positions should have set lower average entry prices during the bear market in 2022 and 2023, instead of setting average purchase prices closer to the mid-$70,000 range after aggressive purchases from 2024 to 2026.
Wesson said older Bitcoin holders were diversifying in the later stages of Strategy’s accumulation, making the company’s risk-reward profile less favorable.
His criticism cuts to one of the assumptions behind the model: that as long as companies convert their profits into Bitcoin, they can continue to improve shareholder exposure through repeated capital increases.
As preferred dividends have increased, this argument has become more realistic. The lower the average cost base, the more flexibility the strategy has to sell a limited amount of Bitcoin while realizing profits across the treasury.
However, a higher cost base leaves less room between market prices, investor confidence, and the obligations that come with a company’s preferred stock stack.
Jeff Dorman, chief investment officer at Arca, said the strategy has entered its first major bind among public shareholders, Bitcoin holders, and preferred investors.
He argued that the company could have kept a cash buffer aside for dividend payments, but instead used the majority of its reserves to pay down 0% of its debt.
Dorman said the company now faces two main paths if pressure continues. Bitcoin can be sold to help fund preferred dividends, supporting preferred holders while weakening the accumulation narrative. Alternatively, it could suspend dividend payments and maintain a Bitcoin stack while undermining confidence in its preferred securities.
The strategy can also raise new capital, but that depends on market access. STRC’s design relies on its ability to issue securities close to par. If investor demand weakens, the company may need to offer higher yields to attract buyers, resulting in increased future debt for the same Bitcoin pool.
Dorman said tensions could continue for the next four months. This timeline is a test of whether the strategy can keep its funding loop intact while Bitcoin continues to be volatile, STRC trades below par, and dollar reserves reduce the margin for error.
(Tag Translation) Bitcoin
