Strategy's New Bitcoin Monetization Program: Will It Sell More BTC?

Strategy now has board approval to sell part of its Bitcoin holdings, but it is not required to sell any. 

On June 29, the company filed an 8-K with the US Securities and Exchange Commission introducing a "Digital Credit Capital Framework," which includes a Bitcoin Monetization Program. The program gives management board approval to sell Bitcoin when it sees an advantage in doing so, rather than requiring fixed, scheduled sales.

What Is the Digital Credit Capital Framework?

The Digital Credit Capital Framework is a set of rules Strategy adopted to manage its cash, dividends, and debt obligations while still holding onto its long-term Bitcoin position. It bundles together several pieces:

• A Bitcoin Monetization Program that allows BTC sales for specific purposes
• A board-approved US dollar reserve policy
• A higher dividend rate on its STRC preferred stock
• New buyback authorizations for preferred securities and common stock

Michael Saylor, Strategy's Founder and Executive Chairman, said the framework is meant to strengthen credit quality and give the company more flexibility in how it manages capital, while keeping its long-term Bitcoin exposure intact.

How Does the Bitcoin Monetization Program Work?

The program does not set a fixed limit on how much Bitcoin Strategy can sell. Instead, it authorizes BTC sales for three specific purposes:

Building the USD Reserve

Strategy may sell up to $1.25 billion worth of Bitcoin to build or replenish its USD Reserve, which exists to cover preferred stock dividends and interest payments.

Funding Preferred Stock Repurchases

The company can also sell Bitcoin to finance up to $1 billion in repurchases of its Digital Credit Securities.

Buying Back Common Stock

A separate authorization allows up to $1 billion in buybacks of Strategy's Class A common stock, which can also be funded through Bitcoin sales if needed.

Any monetization beyond these three purposes would need additional board approval, and the repurchase programs have no expiration date.

Will Strategy Actually Sell More Bitcoin?

Strategy said the program does not obligate it to sell any Bitcoin. Sales would happen only if management determines it is more advantageous than issuing Class A common stock or pursuing other financing routes. If Strategy did raise the full $1.25 billion through Bitcoin sales at current prices, it would need to sell roughly 20,800 BTC, equal to about 2.5% of its 847,363 BTC holdings.

The company's cash position already provides a cushion. Strategy's USD Reserve stood at about $2.55 billion, enough to cover roughly 17.4 months of preferred dividend and interest obligations. Saylor said combining that reserve with the $1.25 billion monetization capacity gives Strategy up to $3.8 billion in dividend coverage, or close to 26 months.

Why Did Strategy Raise the STRC Dividend Rate?

As part of the same filing, Strategy raised the annual dividend rate on its Variable Rate Series A Perpetual Stretch Preferred Stock (STRC) to 12% from 11.5%, effective for dividend periods starting July 1. 

The move comes during a difficult stretch for Strategy's securities: MSTR shares have fallen almost 50% year-to-date, and STRC traded as low as $71.25 on Friday, a 28.75% discount to its par value, according to TradingView data. Grayscale research head Zach Pandl recently suggested Strategy sell $3 billion in Bitcoin to cover its cash obligations, a figure well above the $1.25 billion authorized so far.

Strategy's Bitcoin Holdings Remain Unchanged

Strategy did not buy any Bitcoin during the week ended Sunday, leaving its total holdings at 847,363 BTC, purchased for a combined $64.1 billion at an average price of $75,651 per coin. Bitcoin was last trading around $59,480. The company has added a net 3,625 BTC so far in June, after buying 3,657 BTC and selling 32 BTC earlier in the month.

Conclusion

Strategy's Digital Credit Capital Framework gives the company a formal, board-approved path to sell Bitcoin for specific financial purposes, without forcing it to do so. The $1.25 billion monetization cap, combined with the existing $2.55 billion USD Reserve, gives Strategy close to 26 months of dividend coverage while its Bitcoin holdings remain unchanged at 847,363 BTC.

Resources

1. Strategy 8-K Filing – US Securities and Exchange Commission: Digital Credit Capital Framework, USD Reserve Policy, and Repurchase Programs
2. ForkLog – Grayscale Urges Strategy to Sell $3 Billion in Bitcoin
3. CoinGape – Strategy Selling $3 Billion Bitcoin Could Restore Faith In MSTR, STRC: Grayscale Exec