Strategy's Accounting Gimmick: The BTC Sale Cap Far Exceeds $1.25 Billion

Source: Bankless

Compiled by Odaily Planet Daily (@OdailyChina); Translated by Azuma (@azuma_eth)

On July 7, Strategy disclosed that it sold 3,588 BTC between June 29 and July 5, valued at approximately $216 million.

The proceeds were used to pay dividends on STRC and replenish the USD Reserve, which was previously drawn down for dividend payments. Despite this sale, Strategy stated that its full $1.25 billion reserve-building capacity remains intact.

• Note from Odaily: In the "rescue plan" announced last week, Strategy stated it had authorized the company to sell BTC to build a USD reserve of up to $1.25 billion.

In other words, the $216 million in BTC sold by Strategy to replenish reserves was not counted against the previously disclosed reserve-building capacity.

Strictly speaking, there is a technical distinction between the two: one is "replenishing" reserves, the other is "building" reserves. However, in practice, both types of sales ultimately flow into the same reserve pool for the same purpose; they are merely categorized differently.

Viewed from another angle, the previously disclosed "BTC Monetization Program" never limited Strategy to selling only $1.25 billion in Bitcoin total. It only capped one specific pool: selling BTC to "build" the USD reserve.

The program also allows Strategy to sell BTC for other purposes, which is precisely what we are seeing now.

Three Capital Pools

On June 29, after weeks of pressure on MSTR and STRC, Strategy launched the aforementioned BTC "Monetization Program" as part of its broader "Digital Credit Capital Framework."

The program authorizes Strategy to sell Bitcoin and outlines three primary uses:

• First, build the reserve, allowing the sale of up to $1.25 billion in BTC to establish the USD Reserve;
• Second, cover the preferreds, i.e., selling BTC to meet fixed dividend and interest obligations on Strategy's preferred shares and debt. If management believes "selling BTC is more advantageous than issuing common stock," it may also sell BTC to replenish reserve funds previously used for these obligations.
• Third, fund buybacks, i.e., selling BTC to repurchase up to $1 billion in preferred shares and up to $1 billion in MSTR common stock. Additionally, proceeds from BTC sales may be used to cover related taxes, fees, and other expenses.

At the time, the entire market discussion focused on the $1.25 billion cap of the first pool, but the reality is far different.

Looking only at the third pool, it effectively adds another $2 billion in selling capacity. Therefore, counting only the portions with explicit caps, Strategy's currently designed BTC selling scale already exceeds $3 billion. This does not include the pool for paying dividends, interest, and replenishing reserves — which currently has no disclosed cap.

Building vs. Replenishing

This is where the nuance lies.

The purpose of the USD Reserve is to pay preferred stock dividends and debt interest obligations. Under the current policy framework, it cannot be used for stock buybacks.

As of June 28, Strategy's USD Reserve stood at $2.55 billion, sufficient to cover the company's annual debt and preferred stock payment obligations of approximately $1.76 billion — providing roughly 17 months of coverage. Strategy's board requires a minimum of 12 months of coverage, unless the board approves lowering this threshold.

This is why the distinction between "building" and "replenishing" reserves is noteworthy.

• Selling BTC before paying dividends and adding the cash to the reserve: This is defined as "building."
• Using reserves to pay dividends, then selling BTC to refill the reserve: This is defined as "replenishing."

The program treats these as separate categories, but they effectively achieve the same thing — converting BTC into cash to cover preferred stock dividends and interest expenses.

These details were already disclosed in the documents, but the recent sale has made the distinction more apparent. Strategy sold $216 million worth of BTC, used the funds for dividends and replenishing reserves, yet simultaneously announced that its $1.25 billion reserve-building capacity remained fully intact.

Now, the market must begin to understand Strategy's "specialized language": "building" and "replenishing" are essentially accounting classifications, but they determine whether Strategy's BTC sales consume the "public cap" visible to the market.

From Hoarding to Active Capital Management

In the June 29 announcement, Michael Saylor stated that the framework reflects Strategy's need for "liquidity, discipline, and active capital management."

Strategy CEO Phong Le was even more direct: "Strategy is transitioning from a one-way capital issuance model to an active capital management model."

As Castle Island's Matt Walsh and Jeff Dorman explained in a podcast last week, Strategy has effectively transformed into an actively managed hedge fund.

The old Strategy narrative was simple: sell MSTR stock → buy Bitcoin → offer investors leveraged BTC exposure. But the logic has changed.

Now, Strategy is buying and selling different components of its own capital structure to manage the tensions between common stock (MSTR), preferred shares, the USD reserve, and Bitcoin assets (BTC).

This dynamic also introduces new conflicts of interest, as Walsh and Dorman pointed out:

• Selling common stock can support preferred dividends but may depress MSTR's premium relative to its BTC holdings;
• Selling Bitcoin can extend cash runway but further weakens the core "never sell" narrative;
• Supporting the preferred share structure can maintain market confidence but depletes cash reserves;
• Cutting preferred dividends can protect liquidity but may cause preferred share prices to crash.

So-called "reserve loopholes" are a manifestation of this shift. Today, Bitcoin is no longer just an asset for Strategy to continuously accumulate; it is becoming a balance-sheet lever used to sustain the preferred share structure.

What We Will Ultimately See

Now, investors must assess whether Saylor can operate such a "machine" — where each adjustment to a lever in the capital structure helps one part while potentially threatening another.

This is the most noteworthy conclusion to draw from the July 6 filing. Strategy is not without options. It may have more room to maneuver than the market superficially perceives.

Please stop mistakenly believing the $1.25 billion cap represents the total limit on Strategy's Bitcoin sales.

Today, Strategy has become an institution that the market needs to reassess. Every specialized term now carries greater weight:

• Build;
• Replenish;
• Issue;
• Repurchase;
• Defend;

Just as Fed watchers meticulously parse every punctuation mark in policy statements, the market must dissect every term used by Strategy to judge its implications for future BTC sales.

By launching this program, Strategy has gained greater flexibility, but the underlying contradictions remain. This is no longer a simple "leveraged Bitcoin trade." It has become a bet on its ability to manage active capital.

Can Strategy continuously sell BTC, replenish reserves, issue securities, repurchase stock, and maintain its capital structure without any single component breaking the others?

Personally, I am not willing to place that bet.