Strategy's Accounting Gimmick: The Bitcoin Sale Cap Is Far More Than $1.25 Billion

This article is from: Bankless

Compiled by Odaily Planet Daily (@OdailyChina); Translator: Azuma (@azuma_eth)

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

The funds were used to pay dividends on STRC and replenish the USD Reserve previously used for dividend payments. Despite completing this sale, Strategy stated that its full $1.25 billion reserve-building capacity remains intact.

• Odaily note: In the "self-rescue plan" announced last week, Strategy stated it had authorized the company to sell BTC to build a USD reserve of up to $1.25 billion.

In other words, the $216 million in BTC sold by Strategy to replenish reserves was not counted against the previously disclosed reserve-building capacity.

Strictly speaking, there is indeed a technical difference between the two: one is "replenishing reserves," and the other is "building reserves." But in practice, both types of sales ultimately flow into the same reserve pool for the same purpose, just classified under different uses.

From another perspective, the previously disclosed "BTC Monetization Program" never limited Strategy to selling only $1.25 billion in Bitcoin total; it only limited one specific pool — the sale of BTC to "build" the USD reserve.

The program also allows Strategy to sell BTC for other purposes, which is exactly what we are seeing now.

Three Pools

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

The program allows Strategy to sell Bitcoin and actually mentions three main uses:

• First, build the reserve: Sell up to $1.25 billion in BTC to establish the USD Reserve;
• Second, cover the preferreds: Sell BTC to pay fixed dividend and interest obligations on preferred shares and debt. If management believes "selling BTC is more advantageous than issuing common stock," it can also sell BTC to replenish reserve funds previously used to pay these obligations.
• Third, fund buybacks: Sell BTC to repurchase up to $1 billion in preferred shares and up to $1 billion in MSTR common stock. Additionally, proceeds from BTC sales may be used to cover related taxes, fees, and other expenses.

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

Looking only at the third pool, it actually adds an additional $2 billion in selling capacity. Therefore, considering only the parts with clear caps, Strategy's current design for BTC sales already exceeds $3 billion, and this does not include the pool for paying dividends, interest, and replenishing reserves — which currently has no disclosed cap.

Building vs. Replenishing

The truly subtle point lies here.

The purpose of the USD Reserve is to pay preferred stock dividends and debt interest obligations. Under the current policy framework, it cannot be used for stock buybacks.

As of June 28, Strategy's USD Reserve stood at $2.55 billion, sufficient to cover the company's annual debt and preferred stock payment obligations of approximately $1.76 billion, equivalent to about 17 months of coverage. Strategy's board has set a minimum requirement of maintaining 12 months of coverage, unless the board approves a lower standard.

This is why the distinction between "building reserves" and "replenishing reserves" is worth noting.

• Selling BTC before paying dividends and adding cash to the reserve: This is defined as "building."
• Using the reserve to pay dividends, then selling BTC to replenish the reserve: This is defined as "replenishing."

The program treats them as different categories, but they essentially do the same thing — converting BTC into cash to cover preferred stock dividends and interest expenses.

These details were already disclosed in the documents, but the recent sale a few days ago made the difference in classification more apparent. Strategy sold $216 million worth of BTC, used the funds to pay dividends and replenish reserves, yet still announced 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 accounting classifications, but they determine whether Strategy's BTC sales will consume the "public cap" that the market sees.

From Hoarding to Active Capital Management

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

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

As Matt Walsh and Jeff Dorman of Castle Island explained on their podcast last week, Strategy has effectively transformed into an actively managed hedge fund.

The old Strategy narrative was simple: sell MSTR stock → buy Bitcoin → provide investors with leveraged BTC exposure. But the logic has now changed.

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

This dynamic also introduces new conflicts of interest, as Walsh and Dorman pointed out:

• Selling common stock can support preferred share dividends but depresses MSTR's premium relative to its BTC holdings;
• Selling Bitcoin can extend cash flow duration but further weakens the core "never sell" narrative;
• Supporting the preferred share system can maintain market confidence but consumes cash reserves;
• Cutting preferred share dividends can protect liquidity but may cause preferred share prices to collapse.

The so-called "reserve loophole" is a manifestation of this shift. Bitcoin is no longer just an asset for Strategy to continuously accumulate; it is becoming a balance-sheet lever used to sustain the preferred share system.

What We Will Ultimately See

Today, investors must assess whether Saylor can operate such a "machine" — each adjustment to a lever in the capital structure helps one part while potentially threatening another.

This is the most noteworthy conclusion following the July 6 filing. Strategy is not out of options. It may have more operational flexibility than the market perceives on the surface.

Please no longer mistakenly believe that the $1.25 billion limit represents the total cap on Strategy's Bitcoin sales.

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

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

Just as Fed watchers meticulously analyze every punctuation in policy statements, the market must also dissect every term Strategy uses to determine what it implies for future BTC sales.

By launching this plan, Strategy has gained greater flexibility, but the underlying contradictions remain. This is no longer a simple "leveraged Bitcoin trade"; it has become a bet on active capital management capabilities.

Can Strategy consistently "sell BTC," "replenish reserves," "issue securities," "repurchase shares," and "maintain the capital structure" while ensuring none of these actions disrupt the others?

Personally, I am not willing to bet on that.