Strategy faces roughly $1.5 billion in annual preferred-stock dividend obligations against approximately $477 million in 2025 software revenue, according to Grayscale's head of research. The company sold 32 BTC for about $2.5 million in May, its first bitcoin sale since 2022, to fund preferred payouts. Grayscale's research head characterized the situation as a cash-flow problem rather than a crypto problem, noting that bitcoin produces no yield and the preferred stack has grown from around $730 million in early 2025 to roughly $15.5 billion by mid-2026.
Grayscale Research Head Frames Strategy's Challenge as Cash-Flow Issue
In a podcast with journalist Laura Shin, Grayscale's head of research (who posts on X as LowBeta) stated that Strategy's preferred-equity obligations are "as a cash flow issue, not a crypto issue," adding that bitcoin produces no yield and if the price does not go up, there are only two ways to pay the coupon, neither of which is clean.
Strategy faces roughly $1.5 billion in annual dividend obligations across its preferred-stock instruments, including STRC, its variable-rate preferred that carries an annual rate near 11.5%, and STRK, which pays 8%. The company's software business generated about $477 million in revenue in 2025, meaning dividend obligations outrun revenue by more than three to one.
The company's cash position offers limited cover, with Strategy's roughly $1 billion cash hoard covering less than a year of those payments. The preferred stack itself has ballooned, swelling from around $730 million in early 2025 to roughly $15.5 billion by mid-2026. Some analysts warn this growth could feed a "death spiral" if the company keeps issuing new shares to pay dividends on old ones.
Strategy Sold 32 BTC in May to Fund Preferred Dividends
Strategy sold 32 BTC for about $2.5 million at an average of $77,135 per coin in late May, its first bitcoin sale since 2022, to fund preferred dividends. Chairman Michael Saylor has tried to recast the move as routine, insisting the company expects to acquire 10 to 20 BTC for every one it sells and declaring he wants to make STRC the best credit instrument in the world.
Markets were not entirely reassured and Strategy has since paused the at-the-market program through which it issues STRC after the security slid well below the $100 level it was engineered to hold.
When the preferred slumped to an intraday low of $82.53, some analysts pinned the slide on a leverage-driven liquidation cascade rather than any cash-flow shortfall, arguing Strategy's balance sheet remained intact and the dividend could keep flowing. The cash-flow critique pushes back on that optimism because even if the coupon is covered today, the gap between dollar obligations and software revenue widens each time the company issues fresh preferred shares to cover the last round.
Bitcoin's Zero-Yield Structure Creates Payment Gap
Every strand of the bearish case returns to the same point: bitcoin generates no cash flow. A company that holds dividend-paying stocks or interest-bearing bonds can service its obligations from the income those assets throw off. Strategy holds an asset that produces nothing until it is sold.
Saylor's models suggest bitcoin need only appreciate a few percent a year to keep the machine running, but that assumption breaks down during prolonged downturns when BTC is flat or falling and the coupons still come due.
Frequently Asked Questions
What did Strategy sell in May to fund preferred dividends?
Strategy sold 32 BTC for about $2.5 million at an average of $77,135 per coin in late May, its first bitcoin sale since 2022, to fund preferred-stock dividend payments.
How much does Strategy owe in annual preferred dividends compared to its software revenue?
Strategy faces roughly $1.5 billion in annual preferred-stock dividend obligations against approximately $477 million in 2025 software revenue, meaning dividend obligations outrun revenue by more than three to one.
Why does Grayscale's research head call Strategy's situation a cash-flow problem?
Grayscale's head of research stated that Strategy's preferred-equity obligations are a cash-flow issue rather than a crypto issue because bitcoin produces no yield, and if the price does not go up, there are only two ways to pay the coupon, neither of which is clean.
