Strategy Sold More Bitcoin. Is This a Betrayal of the Bitcoin Ethos?

**Laura Shin** (0:00)
But now this structure that a strategy has created, it shifts that away from belief in Bitcoin to now you have to have faith in the team at strategy. My personal take on this is that this is also a departure from the Bitcoin ethos. It's literally kind of going back to what Michael Saylor has been criticizing, where he has criticized the US dollar, he calls it trash, like a melting ice cube, whatever. And the dollar is something where there's kind of like a small group of people, they're sort of in charge of how it's managed. And so you have to have faith in those people. Strategy has sort of created their own version of that. And so it's just not really aligned with Bitcoin's philosophy. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. Before we dive into today's interview, we will take a quick break to hear from the sponsors who make this show possible. Fidelity has been investing in blockchain since 2014 They're not wondering if digital assets will shape the future. They're hiring the talent to help ensure they do. Explore opportunities today at crypto.fidelitycareers.com.
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Today's guest is Parker White, CFA and the founding contributor and chief investment officer at Apyx. Welcome, Parker.

**Parker White** (1:49)
Thanks for having me, Laura.

**Laura Shin** (1:51)
Strategy Today announced its largest Bitcoin sale ever of 3,580 Bitcoin for $216 million to pay dividends on its preferreds. That brings its USD total and its treasury to 2.55 billion. This is what I've seen multiple market observers call for, noting that the company's runway for paying its preferreds seems to be a drag on the price because the runway was too short. Indeed, we did see that the MSDR price and STRC price rose after this announcement. MSDR is trading at about 104 or it was like an hour or so ago, and STRC is trading at about $91, which of course is still below par but improved from before. However, the company had a 20 percent loss on the price of Bitcoin on those sales. It sold at an average of 60,197. This sale happened shortly after and had actually purchased roughly the same number of Bitcoin, 3,657.
That was at an average price of 64,577.
Basically, in the last month, they had a net increase of 69 Bitcoin. But when you net out both the purchase and the sale, those 69 Bitcoin were acquired at a price of about $290,000 per Bitcoin. So what did you think of their recent move to sell Bitcoin, to extend the runway they have to pay for these preferreds?

**Parker White** (3:30)
Sure. So you really need to zoom out when you look at strategy. If you, to use this example here, and I'm sure what they're doing is they're tax loss harvesting, right? So what you do is you use specific, it's called spec ID, so specific lots of Bitcoin. And so they didn't sell the Bitcoin that they bought a couple of weeks ago. They sold the Bitcoin that they bought back in, let's say 2020 or 2021 And so if you used their actual accounting for the way they did it, then they had like a 6X or 5X or 4X, whatever it was gain on the Bitcoin that they sold here. So, I mean, it doesn't really matter which Bitcoin is being sold. The point is you really need to zoom out and to look at the kind of capital allocation decision.
But at a much broader level, strategy has faced a couple of challenges. And one of the big challenges is that the credit rating agencies, so S&P, Moody's and so on, when they evaluate the credit worthiness of the company, they hold the value of the Bitcoin at zero.
Which makes obviously no sense. And so that's why the Preferreds have a junk rating, a B- rating, because it's only the software business that's being used to, in their eyes, service the liabilities. And so the point the strategy has been trying to make to the rating agencies is like, look, we can use this Bitcoin. It's as good as cash. We can use it to fund the dividends. And so now they just prove that like, hey, look, we can actually sell some Bitcoin to fund at least a month's worth of dividends and also the quarters for the other Preferreds. And so Bitcoin is an actual asset. It's not just this accounting thing sitting on the balance sheet that's never gonna be touched. It can actually be utilized. And kind of the holy grail here is if strategy can get their rating into that investment grade category because Bitcoin is an actual asset that they can use, then that opens up a whole bunch of additional fund mandates that are required to only invest in investment grade securities. And so there's a bunch of reasons they would do this, tax loss harvesting, proving that dividends can be paid from the Bitcoin, for the rating agencies. I could continue to go, but I think it's a smart move. It makes a lot of sense. $200 million worth of Bitcoin is kind of a drop in the bucket. I'm sure they'll be back to buying more Bitcoin pretty soon.