[DigitalToday reporter Jinju Hong] Strategy has expanded its dollar reserves to $4.65 billion, drawing attention to the reasons behind the move. An analysis said the key was not simply stockpiling cash to brace for a bitcoin price drop or to fund additional purchases, but a distinctive financing structure that issues credit products such as preferred shares based on bitcoin.

Bitcoin Magazine reported on Aug. 11 local time that Strategy's dollar reserves rose by about $900 million to $4.65 billion from $3.75 billion two weeks earlier.

Over the same period, Strategy appeared to have sold about 7,000 bitcoins. That prompted some market interpretations that Strategy may have partly revised its bitcoin buying strategy, but the analysis said the focus of the cash buildup lay in the credit-funding structure rather than bitcoin investment itself.

Unlike typical bitcoin-holding companies, Strategy raises funds by issuing securities with preferred-share characteristics backed by a large bitcoin portfolio. The problem is that such securities come with fixed dollar dividend obligations.

Bitcoin does not generate cash flow on its own. The analysis said cash generated from Strategy's software business alone is not enough to fully cover dividends and various financing costs arising from its current capital structure.

It described Strategy's dollar holdings as serving as a kind of reserve supporting credit issuance rather than simply funds waiting to be invested.

With ample cash, preferred-share investors have less concern about dividend-paying capacity. That could help Strategy secure investment demand when it issues additional securities, and over the long term could also lead to lower capital-raising costs.

Credit ratings are also cited as a factor influencing Strategy's cash accumulation. S&P assigned Strategy a B- rating in October 2025 and pointed to key risk factors including concentrated bitcoin holdings, weak dollar liquidity and very weak risk-adjusted capital.

The outlet said S&P's approach does not treat bitcoin as a sufficient buffer in the capital base because of its high market volatility. That means that even if Strategy holds a huge amount of bitcoin, it is difficult from a credit-rating perspective for it to be fully recognised as stable liquid assets.

A strategy of piling up cash also carries costs. For example, if a company issues $100 of preferred shares carrying a 10 percent annual dividend and secures three years of dividends in cash in advance, the money that can actually be put into bitcoin purchases and the like shrinks to $70. In that case, for the $70 to cover $10 in annual dividend costs, it must earn about 14.29 percent. The nominal cost of capital is 10 percent, but based on the funds actually invested, the required rate of return is 42.9 percent higher.

Bitcoin price volatility can further increase that burden. Even if bitcoin posts a return below the required rate in a given year, the preferred dividend obligation does not disappear. The larger the reserve, the smaller the share of newly raised funds that is actually put into bitcoin purchases. If bitcoin returns do not exceed the cost of capital over the long term, the difference could ultimately become a burden that falls on common shareholders.

Even so, holding cash is not unconditionally inefficient. Even when bitcoin prices plunge, a cash reserve can reduce the likelihood of being forced to sell bitcoin holdings to pay dividends or interest. It can also be used to buy back those securities at discounted prices when they fall below par value. Strategy used $25 million in late July to buy $28.89 million of STRC at par value, a discount of about 13.47 percent to par.

It later used $108.6 million secured through bitcoin sales to additionally retire 1.15 million STRC shares. The analysis said such transactions can reduce future dividend obligations while also having a positive impact on net bitcoin value per share.

Some also point out that it is difficult to apply Strategy's cash-hoarding strategy as-is to other bitcoin-holding companies. For most companies, the appropriate cash level should start not from an arbitrary reserve target but from funds needed for actual business operations. Funds for payroll and taxes, debt repayment, supplier payments, short-term capital investment and fluctuations in operating cash flow come first.

A company with recurring revenue and a stable cost structure can operate with a relatively small cash buffer. By contrast, firms in cyclical sectors or capital-intensive companies need to secure more liquidity.

The analysis concluded that cash beyond operating needs and an appropriate liquidity buffer should have a separate economic purpose. Otherwise, cash itself does not generate returns and can act as an opportunity cost that forces a company to forgo other investment opportunities. If it holds excess capital, a company should choose the most efficient use of funds by comparing options such as share buybacks, repayment of high-cost debt and investments that can be expected to deliver higher returns.

The analysis said Strategy's large dollar reserves therefore differ in nature from typical corporate cash management. It said the need for cash reserves has grown as Strategy's distinctive capital structure, which combines a large credit-issuance business atop a bitcoin balance sheet, intersects with the reality that bitcoin is difficult to be recognised as a sufficient buffer in credit-rating processes.

Conversely, it said most bitcoin-holding companies that do not have such a credit-issuance structure have relatively little economic reason to pile up large amounts of dollars beyond working capital and an appropriate liquidity buffer.