• A precarious predicament 
• 'A panicked rush to the exit'

Grayscale Head of Research Zach Pandl has argued that Strategy (MSTR) liquidating a portion of its massive Bitcoin treasury might be the best path forward for the embattled Virginia-headquartered firm. 

Pandl noted that if Strategy raises the dividend on its $STRC preferred stock by 50 basis points next week, it would equate to approximately $100 million in higher dividend obligations over the next two years. 

In his view, such a move "probably does not help market confidence." Instead, Pandl outlined a more drastic measure to right the ship.

A precarious predicament 

In the meantime, Strategy's enterprise multiple to net asset value (mNAV) has "closed below 1 for the first time in history."

The market now values the company at less than the underlying Bitcoin it holds on its balance sheet. 

Researcher André Dragosch pointed out that the current valuation "also implies that the market expects that MSTR will sell 1% of their BTC stack." Dragosch has come up with a contrarian view: "If you think that’s still unlikely, then MSTR is just becoming increasingly attractive here."

'A panicked rush to the exit'

Not everyone believes Strategy needs to sell its Bitcoin or manually intervene to save the STRC security (even though this is emerging as some sort of consensus within the cryptocurrency community). 

Crypto commentator Bit Paine argued that an underrated aspect of the STRC design is that the effective yield naturally rises in tandem with the falling price: 

"This creates a natural equilibrium wherein it becomes attractive on a risk-adjusted basis, even without Strategy manually adjusting the interest rate," Bit Paine explained.

Paine has noted that the market is currently gripped by a "panicked 'rush to the exit' bank run mentality" that is depressing the price well below its fundamental credit value.

"The best near-term thing to do may simply be to increase the USD reserve as much as possible and make either a small or no upward adjustment to the interest rate," he advised. "Let the market decide at what effective yield the security is attractive, and give bitcoin time to recover."

Blockstream CEO Adam Back pointed out that those pricing STRC as distressed debt are missing the broader picture. "It seems that the people pricing $STRC based on distressed debt are not appreciating the picture," Back noted, noting that their convertible notes are long dated. 

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