Strategy CEO Phong Le signaled the company may eventually lend part of its bitcoin holdings once large US banks fully enter the market with institutional-grade custody and lending infrastructure, while stressing that the core strategy remains to “buy and hold bitcoin.”
Building A Dollar Buffer Around A Bitcoin Core
Speaking on Bloomberg Crypto on December 2, Le outlined why the company built a $1.4 billion dollar reserve to fund dividends and interest, even as BTC price has endured a sharp drawdown from its early-October high near $125,000 to a brutal November that saw a further 17% decline before a rebound above $92,000.
Le framed Strategy’s balance sheet as a barbell between long-term BTC exposure and short-term cash obligations: “We have long-term strategy, which is to buy and hold bitcoin. That is our primary treasury reserve asset. And we have short-term dollar obligations created because of the dividends we have on our preferred notes.”
To avoid being forced to sell BTC when the company’s equity trades close to or below the value of its underlying holdings, Strategy created a dedicated US dollar reserve: “If we want to really create a bulletproof balance sheet, let’s have the global reserve digital asset, bitcoin, for the long term, and the global reserve digital currency for the short term. That is why I created the US dollar reserve, to pay down dividends in the short term any case that we needed.”
Le said Strategy recently issued equity “in 8.5 days” to pre-fund roughly 21 months of preferred dividends, and now aims to maintain a cash buffer equal to “two to three years of dividends,” a policy he expects to maintain for “the next five or 10 years” before reassessing as the capital structure evolves.
He defended the company’s insistence on continuing the dividend, arguing that suspensions “create fear, uncertainty, doubt” and harm equity holders: “Our objective is to pay the dividend into perpetuity. Never say never, but I think preserving the payment of the dividend […] is the right thing for the short term. It is also important for the bitcoin asset class.”
At the same time, he sought to defuse concerns that Strategy is overleveraged or at imminent risk of selling BTC. Le said Strategy has “12% leverage” on its debt alone and “27% leverage” including preferreds, versus “60% to 80%” at a typical US public company. If the company continues to grow its cash reserves to cover multiple years of dividends, he said, “really [we’re] talking about the end of 2028” before any realistic scenario where selling bitcoin to fund dividends might be considered.
Le also pushed back against MSCI’s suggestion that “digital asset treasury” companies may resemble funds and could be excluded from indices. He argued Strategy is a “fully integrated, vertically integrated bitcoin operating company” that buys bitcoin, issues securities, creates products, generates operating income and employs full corporate staff, and therefore should trade at a premium reflecting its ability “to grow our treasury and our operating income over time.”
From HODL To Considering Bitcoin Lending
On lending, Le said Strategy has deliberately kept its business “very simple” so far: “We buy and we hold bitcoin.”However, that may change as traditional finance ramps up BTC offerings: “Over the course of the next year […] big, real banks will offer custody, lending service and staking and otherwise. I think when they enter that space and when they have different counterparties, it is something we would consider and be enthusiastic about.”
Le added that Strategy has already had “a lot of constructive discussions” with large US banks exploring bitcoin custody, exchange and lending and is “excited to partner with them” once those platforms are fully in place.
At press time, Bitcoin traded at $92,997.
Featured image created with DALL.E, chart from TradingView.com
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