CNBC's MacKenzie Sigalos reports on Strategy’s move to build a $1.5 billion dividend reserve and cut its full-year targets as a shifting bitcoin market pressures its crypto-treasury strategy.

Wall Street

Bitcoin experienced a significant decline, reaching its lowest price since April as institutional support weakened and ETF inflows remained modest. Digital asset treasury companies, once reliable buyers, are now facing potential forced selling, contributing to market instability.

Strategy, a major corporate holder of Bitcoin, responded by establishing a $1.5 billion reserve fund to pay dividends and reassure shareholders. However, the need for this measure has led to an erosion of confidence in Strategy's position, further impacting market sentiment and contributing to the ongoing sell-off.

Strategy builds cash buffer as bitcoin selloff tests its crypto bet

And now a sharp sell-off in the crypto markets today, with Bitcoin hitting the lowest level since April, as we mentioned. Let's get to Mackenzie Cigalos for a look at why. Mack. Hey, John. So this is more of a structural reset. That institutional floor that had been propping up Bitcoin just isn't giving the same support anymore. Spot Bitcoin ETF flows have finally flipped back to net positive, but they're pretty tepid. Three straight sessions of only modest inflows, and then those all-important digital asset treasury companies that were effectively guaranteed buyers of Bitcoin, Ether and Solana, they're now staring down potential forced selling. Strategy, the corporate proxy for the Bitcoin trade, has seen its premium fade as investors wait on MSCI's decision that could reclassify heavy crypto holders as investment funds and force index money out. At the same time, liquidity is thinning. Some ETF holders are now underwater, and even longer-term wallets are starting to trim. And that leaves a much more speculative retail trader as the marginal buyer here, which makes every downdraft hit harder. So in that kind of setup, any macro shock hits outsized. Headlines out of Asia on Bank of Japan tightening, China's weaker data and crypto warnings, plus fresh U.S. numbers this week that could sway the Fed, all feed straight into a market that is already on edge. Guys? Mack, I'm taking a look at shares of Strategy right now. They're up 1% here in overtime, but down in the regular trading session at 3%. A lot of focus on that name specifically, where Bitcoin is concerned, because they have been something of a whale in the Bitcoin market over the last couple of years, and a cut to guidance on Bitcoin pricing. Also announced a reserve fund. How should we think about what's happening there? So this announcement this morning that Strategy had cashed out common stock to put together this $1.5 billion U.S. dollar reserve to pay both dividends on preferred stock and then interest on outstanding dividends. This is really about shoring up confidence and giving shareholders an incentive to weather the storm. I will say they do have a standing filing to do so, but the move was seen as, you know, one designed to ensure that investors felt confident in staying in the trade and giving them a reason not to cash out of the stock by reassuring them that they wouldn't be forced to sell substantial Bitcoin holdings. But the fact that they even had to take that step is part of why you saw the sell-off today, this erosion of confidence in Strategy's position at the moment.

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