The Real Cost of Strategy's Forced Dollar Hoarding

Should Bitcoin companies hoard dollar reserves? Unveiling the complete logic behind the truth.

Written by: Allard Peng

Compiled by: AIdidiaoJP, Foresight News

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

When this figure was released, the entire crypto community erupted. Why would a company that has embedded "hoarding Bitcoin" into its DNA and has almost all its assets tied to BTC suddenly start hoarding fiat currency on a large scale? More importantly, should other Bitcoin treasury-related companies follow suit?

This is not a simple "should or shouldn't" question. It involves credit ratings, capital structure, opportunity costs, volatility risks, and the true business model positioning of Bitcoin companies. Today, we will peel back the layers to uncover the truth.

Why is Strategy so fixated on dollars? Because it has taken a path that few others can follow.

Strategy is increasingly resembling a "digital credit" issuance platform rather than a traditional software company. The preferred securities it issues are essentially backed by a massive Bitcoin balance sheet. These securities come with fixed dollar dividend obligations—regardless of Bitcoin's price fluctuations, dividends must be paid in dollars on time.

Herein lies the problem: Bitcoin itself does not generate any cash flow. While Strategy's software business still exists, the cash it generates is far from sufficient to cover its increasingly large capital structure.

Worse still is the traditional credit analysis system. In October 2025, S&P rated Strategy a B-, stating plainly: excessive Bitcoin concentration, insufficient dollar liquidity, and extremely weak risk-adjusted capital. According to S&P's methodology, Bitcoin is almost directly excluded from "effective capital" due to market volatility risk—no matter how many BTC there are, they equate to zero in their eyes.

When we previously analyzed this rating report, we clearly mentioned: if one wants to improve their credit rating, cash reserves are one direction worth considering seriously.

Thus, Strategy chose to hold a large amount of dollars. The purpose is straightforward—to support its ongoing ability to issue digital credit. More dollar liquidity makes the preferred securities appear "safer" in the eyes of investors and rating agencies, thereby expanding demand and lowering financing costs.

However, cash is not a free lunch. Excess capital should generate returns. Regular companies can reinvest, buy back stock, or pay dividends. The most direct choice for Bitcoin companies is to buy more Bitcoin. Every dollar in cash sitting on the balance sheet means you forgo the potential positive returns from Bitcoin in exchange for a certain negative real return (inflation erosion).

Strategy is willing to take this loss because its business model is already tied to "continuously issuing credit." Three extremely special conditions exist simultaneously:

• Bitcoin almost dominates the entire balance sheet;
• Rating agencies impose heavy penalties on Bitcoin exposure;
• Management has clearly stated the intention to continue large-scale issuance of digital credit.

Each of these three conditions is already quite special, but their combination creates a situation where "cash hoarding is necessary." Conversely, if Strategy did not issue credit, it would not need these dollars at all.

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

Let’s get straight to the numbers and clarify the burden.

Assuming Strategy issues $100 in preferred stock with a 10% annual dividend rate. To cover three years of dividends, it must reserve $30 in cash, leaving only $70 to invest in Bitcoin.

It still needs to pay $10 in dividends each year. Therefore, this $70 Bitcoin investment must generate at least:

10 ÷ 70 = 14.29%

The originally claimed 10% capital cost instantly transforms into a threshold return rate of 14.29% for actual deployed capital. Cash reserves have directly raised the return requirement by 42.9%.

Cash itself can earn a bit of interest, which slightly alleviates this figure, but the structural burden will not disappear.

The true threshold is actually higher. Bitcoin is highly volatile, and in some years, it may significantly underperform this 14.29%. But dividends cannot be skipped (assuming no default). Thus, in addition to the "cash burden," there is an added layer of "volatility burden"—you are using a high-volatility asset to amplify leveraged payments of fixed obligations. This risk must be compensated by raising the threshold further.

The result is harsh: the larger the required cash reserves, the lower the proportion of each additional dollar that can actually enter Bitcoin. If Bitcoin's long-term appreciation cannot consistently exceed this elevated threshold, the ultimate cost will be borne by common shareholders.

Of course, cash is not entirely useless. It provides real option value:

• When Bitcoin plummets, it can cover dividends and interest, avoiding forced sales at low prices;
• When the trading price of preferred securities is significantly below book value, it can facilitate opportunistic buybacks.

Strategy recently executed a brilliant move. At the end of July, it used $25 million to buy back STRC with a book value of $28.89 million, at a discount of 13.47%. It then used the $108.6 million obtained from selling Bitcoin to repurchase another 1.15 million shares of STRC. Buying back preferred stock at a price below par means using less cash to eliminate more preferred debt and future dividend obligations. This is a tangible enhancement to "Net Bitcoin Per Share."

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

Now, let’s shift the focus back to the vast majority of Bitcoin companies.

For them, cash needs should be strictly tied to the business operations themselves, rather than arbitrarily setting a "reserve target." It’s important to note that even Strategy itself is unclear about how much cash it needs to hoard to achieve a better rating or attract more credit investors to buy STRC.

A company with real cash flow typically has a clear understanding of its expenditure structure: salaries, taxes, debt repayments, supplier payments, recent capital expenditures, plus a reasonable buffer for fluctuations in operating cash flow.

The size of the buffer depends on the stability of the business.

• Companies with recurring income, low fixed costs, and predictable expenditures can maintain a smaller buffer;
• Businesses with strong cyclicality and significant capital expenditures must retain more.

The only legitimate reason for increasing reserves is that the business itself requires liquidity, not simply because management wants to see a large sum of cash on the balance sheet.

Once operational needs and prudent buffers are covered, any excess cash must have a clear economic purpose. Otherwise, it will only generate enormous opportunity costs, directly diluting shareholder returns. Any excess capital in a company should compete directly with the company's own threshold return rate:

• Buy back significantly undervalued stock;
• Repay high-cost debt;
• Or invest in projects that can generate higher returns.

For Bitcoin companies, the default high-return project is often to continue hoarding Bitcoin.

Conclusion: Strategy is an Extreme Exception; Most Companies Have No Reason to Hoard Dollars on a Large Scale

Putting all the logic together, the answer is quite clear.

Strategy is an extremely rare case. Its cash reserves exist solely because it has built a large digital credit issuance machine on top of its Bitcoin balance sheet, while credit rating agencies, with evident institutional inertia, treat legitimate, highly liquid Bitcoin assets as if they are worth zero.

Companies without this special liability structure—essentially all other Bitcoin-related enterprises on the market—have almost no reason to hoard dollars on a large scale, aside from maintaining daily operations and reasonable liquidity buffers.

Hoarding an extra dollar in cash means buying one dollar less in Bitcoin. Under the assumption of Bitcoin's long-term upward trend, this is exchanging a certain negative real return for uncertain "safety." For most companies, this is not cost-effective.

Ultimately, what truly determines whether to hold cash or Bitcoin is not emotion or the actions of others, but your own business model, capital structure, and real cash flow needs.