Peter Schiff Claims Strategy Bitcoin Funding Mechanism Is Broken
Longtime crypto critic Peter Schiff has claimed that Strategy's ability to fund its Bitcoin purchases is compromised. In a recent podcast, Schiff noted that the company's Stretch preferred stock (STRC) has rebounded to around $99.40, nearing its $100 par value. He attributed this recovery to weekly buybacks and Bitcoin's rise from $60,000 to above $80,000, which he believes helped restore confidence or triggered short covering. However, Schiff argued that the recovery does not address the core issue: Strategy can no longer sell more STRC, limiting its ability to raise funds for large-scale Bitcoin acquisitions.
Schiff also warned that Bitcoin could face a downturn if tech stocks pull back, potentially undermining Strategy's financing structure. Despite his concerns, the company recently made significant moves. According to a Monday 8-K filing, Strategy purchased 334 Bitcoin between October 1 and October 4, averaging $85,839 per coin. The company funded this purchase by selling 92,894 MSTR shares and using $13 million in cash. Additionally, Strategy spent $176.3 million to repurchase 1.77 million STRC shares between September 28 and October 4.
The filing highlights both sides of the debate. While Strategy did buy Bitcoin, the 334 coins are a small fraction compared to the 1,665 it acquired the previous week. The company also allocated more than six times the amount spent on Bitcoin to retiring STRC. Despite this, Strategy maintained a substantial cash reserve of $4.88 billion USD and an additional $833.4 million in cash, which Schiff acknowledged could help cover dividends for a longer period.
Key levels for MSTR include $170 as resistance, $156 as first support, and $148 as deeper support, based on the 20-day EMA.