Michael Saylor’s Strategy should pause its bitcoin purchases, rebuild its cash reserves and develop a disciplined strategy for buying the flagship cryptocurrency, according to a CryptoQuant report. “Strategy should develop a systematic, fundamental-driven approach to bitcoin purchase timing rather than buying whenever capital is available,” Julio Moreno, head of research at the analytics firm, said in the report. “Buying at cycle tops and accumulating during bear markets has resulted in rapid unrealized loss growth and deteriorating STRC fundamentals,” he said, referring to the company’s flagship preferred stock. The report comes during a multiweek sell-off that has brought Strategy down more than 43% in June alone. On Wednesday, shares tumbled more than 9% to hit a intraday low of $92.28. It was the first time shares fell beneath $100 since 2024. On Thursday, the preferred stock STRC dropped to $79.85, a record 20% below its $100 par level. Both continued to crater on Thursday. Strategy was recently down more than 4% after hitting a fresh 52-week low of $86.62, while STRC was nearly 3% lower. Earlier, STRC tumbled to a new low of $73.62. STRC YTD mountain STRC year to date Moreno noted that Strategy’s USD cash reserve has fallen 38% since the start of the year, while annualized dividend obligations have about quadrupled in the same period. As of Sunday, Strategy’s USD Reserve held $1.4 billion, according to a Monday filing, which also said the company “plans to continue replenishing the USD Reserve over time based on market conditions to support the credit quality of its Digital Credit securities” like STRC. Dividend coverage, which refers to how long the reserve can continue to fund dividend payments, has been reduced to just 14 months from more than seven years, Moreno added, and the company needs about $2.8 billion in the cash reserve – or 24 months of coverage – for STRC to recover. Despite the sell-off, Strategy still holds about $50 billion in bitcoin at current prices, which bulls argue provides it with a long-term buffer against liquidity stress. The company has said its capital structure is manageable even under adverse crypto conditions, but critics are concerned higher dividend payments on preferred shares and upcoming debt repayment deadlines could signal growing financial pressure or future refinancing risk. “When STRC trades near or above its intended $100 level, Strategy can efficiently issue new shares through its ATM program and use the proceeds to acquire additional bitcoins,” Benchmark analyst Mark Palmer said in a note Monday. “When STRC is trading materially below par, then that mechanism slows, and the company’s bitcoin acquisition activity slows with it. However, there is a meaningful difference between stating that Strategy’s preferred stock funding engine has become less efficient and asserting that the company’s overall model is broken, as some of its detractors have suggested.” While the CryptoQuant report does not suggest an imminent bitcoin liquidation, Moreno emphasizes Strategy has limited flexibility in how it responds to further stress. Options like raising dividend yields or issuing additional equity could send a short-term positive signal to the market, but would not address the underlying imbalance between cash outflows and reserve levels. “Strategy’s bitcoin holdings provide limited emergency relief, as the company currently holds an aggregate unrealized loss of $10.6 billion,” he said. “All bitcoin purchased in 2024, 2025, and 2026 is underwater, with 2026 losses accelerating sharply as Strategy continued buying in the early stages of the bear market rather than preserving cash. Any forced bitcoin sale at current prices would crystallize these losses at scale and destroy shareholder value.” As the STRC preferred stock is new — less than a year old — and the market is still figuring out how to value these kinds of instruments, volatility “for a novel instrument like this, which is supported by an asset that is inherently volatile itself, is to be expected,” said Sam Callahan, director of bitcoin strategy and research at bitcoin treasury firm OranjeBTC. On top of that, some investors are adding leverage, which can trigger sharp moves and periodic leverage-driven events. And while Strategy perhaps should commit to rebuilding its USD reserve, Moreno’s idea to pause bitcoin purchases isn’t without its downside, Callahan said. “STRC is supported by both the bitcoin holdings and the USD reserve,” he said. “The last transaction that strategy did was increase the USD reserve … as well as acquire 520 BTC, and both of those parts of the transaction help improve the credit quality of STRC because it increases the asset base supporting it. … If they have a forward-looking view that bitcoin is going to perform well in the next five to 10 years, then buying bitcoin in these market conditions is really attractive.”