Strategy's real cost of being forced to hoard dollars

Original Author: Allard Peng

Original Translation: AIdidiaoJP, Foresight News

Strategy (formerly MicroStrategy) has seen its USD cash reserves surge to $4.65 billion, up from $3.75 billion just two weeks ago. Meanwhile, it has sold nearly 7,000 bitcoins since the end of June 2026.

These numbers have sent shockwaves through the crypto community. Why would a company that has "accumulating bitcoin" written into its corporate DNA, and has bet nearly all its assets on BTC, suddenly start hoarding fiat currency on a large scale? More critically, should other bitcoin treasury companies follow suit?

This is not a simple "should they or shouldn't they" question. Behind it all lies credit ratings, capital structure, opportunity costs, volatility risk, and the true positioning of a bitcoin company's business model. Today, we'll peel back the layers to reveal the truth.

Why is Strategy Obsessed with USD? Because It Took a Path Almost No One Else Could

Strategy increasingly resembles a "digital credit" issuance platform rather than a traditional software company. The preferred securities it issues are essentially economically backed by its massive bitcoin balance sheet. These securities carry fixed USD dividend obligations—regardless of whether bitcoin rises or falls, dividends must be paid in dollars on time.

Here's the problem: bitcoin itself generates no cash flow. While Strategy's software business still exists, the cash it produces is nowhere near enough to cover its ever-expanding capital structure.

What's worse is the traditional credit analysis framework. In October 2025, S&P assigned Strategy a B- rating, with straightforward reasoning: excessive bitcoin concentration, insufficient USD liquidity, and extremely weak risk-adjusted capital. Under S&P's methodology, bitcoin is almost entirely excluded from "effective capital" due to market volatility risk—no matter how much BTC you hold, it counts as zero in their eyes.

When we previously analyzed this rating report, we clearly noted: if you want to improve your credit rating, building a cash reserve is one direction worth serious consideration.

So Strategy chose to hold large amounts of USD. Its purpose is simple—to sustain its ability to keep issuing digital credit. Greater USD liquidity makes preferred securities appear "safer" to investors and rating agencies, thereby boosting demand and lowering funding costs.

But cash is not a free lunch. Excess capital should generate returns. Ordinary companies can reinvest it, buy back shares, or pay dividends. For bitcoin companies, the most direct choice is buying more bitcoin. Every dollar of cash sitting on the balance sheet means you're giving up bitcoin's potential positive returns in exchange for a guaranteed negative real return (eroded by inflation).

Strategy is willing to absorb this loss because its business model is already tied to "continuous credit issuance." Three extremely specific conditions must hold simultaneously:

• Bitcoin dominates almost the entire balance sheet;
• Rating agencies impose severe penalties on bitcoin exposure;
• Management has clearly signaled continued large-scale digital credit issuance.

Each of these conditions is unusual on its own, but only their combination creates the situation where "hoarding cash is a must." Conversely, if Strategy weren't issuing credit, it wouldn't need those dollars at all.

The Real Cost of Cash Reserves: The "Invisible Tax" Calculated by Math

Let's run the numbers directly to quantify the drag.

Assume Strategy issues $100 in preferred stock at a 10% annual dividend rate. To cover three years of dividends, it must set aside $30 in cash, leaving only $70 actually deployed into bitcoin.

It still must pay $10 in dividends each year. So that $70 bitcoin investment must generate at least:

10 ÷ 70 = 14.29%

The originally stated 10% cost of capital instantly becomes a 14.29% hurdle rate on actually deployed capital. The cash reserve directly raises the return requirement by 42.9%.

Cash itself earns a bit of interest, which eases the number slightly, but the structural drag doesn't disappear.

The real hurdle is actually even higher. Bitcoin is highly volatile, and some years it will significantly underperform that 14.29%. But dividends cannot be skipped (assuming here they aren't deferred). So beyond the "cash drag," there's an additional layer of "volatility drag"—you're using a high-volatility asset to service leveraged fixed obligations. This risk must be compensated for by pushing the hurdle rate even higher.

The result is brutal: the larger the required cash reserve, the lower the proportion of each additional dollar that actually flows into bitcoin. If bitcoin's long-term appreciation rate can't sustainably exceed this elevated hurdle, ordinary shareholders end up footing the bill.

Of course, cash isn't completely useless. It provides genuine option value:

• During a bitcoin crash, it can cover dividends and interest, avoiding forced selling at low prices;
• When preferred securities trade well below book value, it enables opportunistic buybacks.

Strategy recently executed a brilliant move. In late July, it spent $25 million to buy back STRC shares with a book value of $28.89 million—a discount of 13.47%. It then used $108.6 million from bitcoin sales to repurchase another 1.15 million STRC shares. Buying back preferred stock below face value means eliminating more preferred claims and future dividend obligations with less cash. This is a tangible boost to Net Bitcoin Per Share.

Most Bitcoin Companies: Don't Blindly Follow Suit—Cash Needs Must Be Tied to Real Business

Now let's zoom back out to the vast majority of bitcoin companies.

For them, cash needs should be strictly tied to the operating business itself, not set arbitrarily as a "reserve target." Remember, even Strategy itself doesn't know exactly how much cash it needs to secure a better rating or attract more credit investors to STRC.

A company with real cash flow typically has a clear picture of its expenditure structure: payroll, taxes, debt service, supplier payments, near-term capital expenditures, plus a reasonable buffer for operating cash flow volatility.

The buffer size depends on business stability.

• Profitable companies with recurring revenue, low fixed costs, and predictable expenses can maintain a smaller buffer;
• Businesses with cyclicality and heavy capital expenditures must hold more.

The only legitimate reason for increasing reserves is that the business itself needs liquidity—not that management simply wants to see a big pile of cash on the books.

Once operating needs and prudent buffers are covered, any excess cash must have a clear economic purpose. Otherwise, it merely creates enormous opportunity costs that directly dilute shareholder returns. Any company's surplus capital should compete directly against its own hurdle rate:

• Buying back significantly undervalued stock;
• Repaying high-cost debt;
• Or investing in projects that generate higher returns.

For bitcoin companies, the default high-return project is often simply continuing to accumulate bitcoin.

Conclusion: Strategy Is an Extreme Exception—Most Companies Have No Reason to Hoard USD at Scale

Connecting all the logic, the answer is actually quite clear.

Strategy is an extremely rare case. Its cash reserves exist entirely because it has built a large-scale digital credit issuance machine on top of its bitcoin balance sheet, and credit rating agencies, with obvious institutional inertia, treat legitimate, highly liquid bitcoin assets as zero.

Companies without this kind of special liability structure—which is essentially all other bitcoin-related businesses in the market—have almost no reason to hoard large amounts of USD beyond maintaining daily operations and a reasonable liquidity buffer.

Each extra dollar of cash hoarded is one less dollar of bitcoin purchased. Under the assumption of bitcoin's long-term upward trajectory, this is trading certain negative real returns for uncertain "peace of mind." For most companies, that's not a good deal.

Ultimately, what decides between cash and bitcoin isn't emotion, nor is it what others are doing—it's your own business model, capital structure, and genuine cash flow needs.