Singapore-based crypto trading desk QCP Capital has warned that Bitcoin may fail to benefit from the U.S-Iran deal. According to QCP’s analysts, Strategy had limited coverage for dividend payouts. As such, it could be forced to sell more of its BTC holdings to meet this obligation.
Strategy has extended its runway to roughly 7.5 months before running out of cash for dividend payments. In the short term, we think this overhang may continue to prevent Bitcoin from fully participating in the broader macro-optimism.
The dividends are tied to its preferred stocks, led by Stretch [STRC], which have been instrumental in raising capital for BTC buys.
STRC is designed to maintain a price of $100 per share. However, at press time, it was trading at a massive discount of $89. This further underscored STRC distress and muted demand.
For long-time Bitcoin and Strategy critic Peter Schiff, investors of Strategy’s main stock, MSTR, will be the ones carrying the burden of the share dilution.
STRC closed at $89. Investors who paid $100 last month are down 11%. The current yield for new buyers is 12.92%. If Saylor raises the yield to 13%, he will have to sell even more MSTR at bigger discounts to fund it. If he doesn’t raise the yield, the STRC price will keep falling.
Strategy dismisses dividend coverage concerns
Amid intense FUD, Strategy recently cleared the air, noting that it has 32 years of dividend coverage. In doing so, it cited the current value of its BTC holdings.
However, critics were quick to point out that the asset would fall harder if Strategy begins liquidating its BTC holdings. In short, the coverage will shrink even further, similar to how its recent 32 BTC sell-off sharply dragged BTC’s price to $60K.
In fact, Strategy’s response raised more questions than the market assurance it was seeking. For instance – One market watcher said that the statement confirms the firm is a ‘permanent seller.’
Worth pointing out, however, that BTC’s recent correction was accelerated by the Fed’s hawkish interest rate pause. In fact, sophisticated players, as tracked by Options data, have been actively hedging against a potential dip to $62K and $60K.
This was underscored by the high top Options volumes, especially puts (bearish bets) at these strike prices, as Q2 comes to an end.
Overall, despite Strategy’s overhang, the market didn’t expect a sharp BTC drawdown below $60K. However, the market’s positioning could change if Strategy confirms another BTC sell-off.
Final Summary
- QCP believes that Strategy could be forced to offload more BTC to fund dividend obligations.
- Strategy’s attempted market assurance with “32 years of coverage” sparked more fears and backlash.