The U.S. Dollar reserve of Strategy has increased to $4.65 billion from $3.75 million two weeks ago. It also has sold almost 7,000 BTC since late June 2026.
Most people are curious as to why a Bitcoin-focused company would decide to keep billions in fiat. Should other Bitcoin companies do the same thing?
It is in an extremely unique position.
As a result, strategy is increasingly acting as if it were an issuer for Digital Credits: preferential securities which are economically backed up by an immense Bitcoin balance sheet. These instruments generate fixed dollar dividend obligations.
Bitcoin produces no cash flow. Strategy’s Software Business produces too little money to pay for its capital structure.
Credit analysis is a traditional method of analyzing credit. S&P assigned Strategy a B- rating in October 2025, citing its Bitcoin concentration, weak dollar liquidity, and very weak risk-adjusted capital. Under S&P’s methodology, Bitcoin is effectively excluded from the capital base used for this analysis because of its market risk.
The following are some of the ways to get in touch with us our coverage of the S&P ratingWe specifically stated that it was worthwhile to explore a cash reserves, as well as other options, in order to increase credit scores.
The strategy holds the dollars that will support its credit issue. It is a simple reason.
More dollar liquidity can improve the perceived safety of its preferred securities, broaden investor demand, and potentially lower its cost of capital—in the eyes of credit ratings agencies.
Cash still has an economic price. Capital excess should generate a profit. It can be reinvested, used to repurchase stock or distributed by a conventional company. Bitcoin companies can purchase more Bitcoin. Each dollar in cash is a guaranteed way to lose money.
This is because the strategy’s business model relies on issuing credit. The company is faced with three unique situations: Bitcoin dominates the balance sheet and rating agencies penalize it heavily. Management also intends on continuing to issue Digital Credit.
The three requirements are unique and the three together create the need for cash. In other words, Strategy would not need cash if it did not intend to offer credit.
What is the economic effect of having cash on hand?
Cash reserves are a problem when you do the math.
Let’s say Strategy sells $100 in preferred stocks with a dividend of 10% and has three years dividend coverage available. It is required to reserve $30, but can only deploy $70 in Bitcoin.
Still, the preferred costs $10 per month. Bitcoin, which costs $70 to invest in, must then generate:
$10 ÷ $70 = 14.29%
An stated capital cost of 10% becomes a 14.29% barrier rate when capital is actually deployed. Reserves raise the required return 42.9%. Although the interest on the cash is a good thing, the structure drag still remains.
However, the true hurdle actually is higher because BTC will underperform in certain years due to its volatility, but these years require dividends be paid. (Here I assume that dividends aren’t skipped). The volatility drag is also present when attempting to amplify a volatile investment. The hurdle rate must be adjusted higher to compensate for this risk.
Bitcoin is less likely to be impacted by a new dollar when the amount of reserve required increases. Bitcoin will not appreciate if this barrier isn’t overcome over time.
But cash can be useful. Cash creates useful optionality. Cash can be used to cover interest and dividends during Bitcoin drawsdowns. This reduces the risks of forcing Bitcoin sales. The fund can be used to support the opportunistic purchase of securities that trade at a lower value than their stated price.
Recenty, this is exactly what Strategy has done. Late in July it paid $28.89 for STRC’s stated value. This was a 13 47% discount. Later, it used $108.6 millions from Bitcoin sales for the retirement of another 1.15 Million STRC shares. By purchasing preferred stock at a discount, you can remove more claims on senior shares and dividend obligations. The cost of buying preferred stock below par is less than the cash spent. accretive to Net Bitcoin Per Share.
Bitcoin or cash?
For most Bitcoin companies, cash needs should be tied to the operating business rather than to an arbitrary reserve target—consider that Strategy literally does not know how much reserves it needs to get a better rating or for more credit investors to become interested in STRC.
Cash-flowing companies usually have a clear understanding of their cash expenditure. This cash should cover all expenses such as payroll, tax, debt servicing, vendor payments and near-term investments. It also needs to have a cushion for fluctuations in the operating cash flow.
A stable cash flow is a good indicator of the amount to reserve. With predictable revenue and low fixed costs, a profitable company can get by with fewer buffers. Businesses that are capital intensive or cyclical need more. It is important that the reserve increases because it’s needed by the business, not simply because management likes a high cash balance.
After operating costs and prudent liquidity buffers are covered, cash is needed for a specific purpose. If it is not used wisely, the opportunity costs will be high and thereby dilute any returns. Any company that has excess capital can use it to reduce its hurdle rate, buy undervalued stocks, pay off costly liabilities, and invest in projects with a high return.
Strategy, in conclusion, is an extremely, rare case. This cash reserve is only possible because Strategy has built a huge credit business on a Bitcoin-based balance sheet, and credit rating agencies are imposing a lot of inertia. They treat liquid, legitimate assets like they have no value. Companies without that liability structure—which is basically all other companies—have far less reason to accumulate dollars beyond their working capital buffer.
Disclaimer: The content of this page was created by the author. Bitcoin For Corporations This is only for informational use. This article is based on the author’s analysis and opinions and shouldn’t be taken as an investment recommendation. The article is not an offer or invitation to purchase or sell any securities or financial products.
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Source: bitcoinmagazine.com
