Strategy's U.S. dollar reserve has climbed to $4.65 billion, up from $3.75 billion just two weeks prior. Since late June 2026, the company has sold nearly 7,000 BTC. This has prompted a broader question: why would a company built around accumulating Bitcoin choose to hold billions in fiat—and should other Bitcoin-oriented businesses follow suit?

The question carries weight beyond a single company. As more corporations adopt Bitcoin treasury strategies—firms like Metaplanet in Japan, Semler Scientific, and a growing list of others—understanding when dollar reserves make sense versus when they erode shareholder value becomes increasingly relevant across the sector.

Strategy's Unique Position Explains Its Cash Holdings

Strategy, formerly known as MicroStrategy before its 2025 rebrand, increasingly functions as an issuer of Digital Credit—preferred securities economically backed by its enormous Bitcoin balance sheet. These instruments, including its STRF perpetual preferred stock and STRK and STRC preferred share series, carry fixed dollar dividend obligations.

Bitcoin itself generates no cash flow, and Strategy's software business produces insufficient cash to service its capital structure.

Traditional credit analysis compounds the challenge. In October 2025, S&P assigned Strategy a B- rating, citing Bitcoin concentration, weak dollar liquidity, and very weak risk-adjusted capital. A B- rating sits firmly in speculative-grade territory, meaning institutional investors with investment-grade mandates cannot hold the debt, and borrowing costs are materially higher than for higher-rated issuers. Under S&P's methodology, Bitcoin is effectively excluded from the capital base due to its market risk.

As noted in Bitcoin For Corporations' coverage of the S&P rating, building a cash reserve was among the measures worth exploring to improve credit ratings.

Strategy therefore holds dollars to support its credit issuance. More dollar liquidity can enhance the perceived safety of its preferred securities, broaden investor demand, and potentially reduce its cost of capital in the eyes of credit ratings agencies.

The cash still carries an economic cost. Excess capital should generate a return—whether through reinvestment, share repurchases, distributions, or in the case of a Bitcoin company, additional Bitcoin purchases. Every dollar held in cash substitutes potential positive returns with guaranteed negative real returns.

Strategy accepts this trade-off because its business model depends on continued credit issuance. Three unusual conditions converge simultaneously: Bitcoin dominates its balance sheet, rating agencies heavily penalize that exposure, and management intends to keep issuing Digital Credit. If Strategy did not plan to issue credit, it would not need the cash.

The Economic Cost of Cash Reserves

The mathematics of cash reserves creates significant structural challenges.

Consider a hypothetical: Strategy issues $100 of preferred stock with a 10% annual dividend and holds three years of dividend coverage in cash. It must reserve $30, leaving only $70 deployable into Bitcoin.

The preferred still costs $10 per year. The $70 invested in Bitcoin must therefore generate:

$10 ÷ $70 = 14.29%

A stated 10% cost of capital becomes a 14.29% hurdle rate on deployed capital—a 42.9% increase. Interest earned on the cash mitigates this somewhat, but the structural drag persists.

The true hurdle rate is higher still, because Bitcoin's volatility means it will underperform the hurdle in certain years, and dividends must still be paid during those periods (assuming dividends are not skipped). Beyond the cash drag, there is a volatility drag from attempting to amplify a volatile asset, requiring further upward adjustment to the hurdle rate.

The larger the required reserve, the less of every new dollar reaches Bitcoin. If Bitcoin appreciation fails to clear this higher hurdle over time, common shareholders absorb the cost.

Cash is not without merit, however. It provides useful optionality: covering dividends and interest during Bitcoin drawdowns, reducing the risk of forced Bitcoin sales, and enabling opportunistic repurchases of securities trading below stated value.

Strategy executed precisely this strategy recently. In late July, it paid $25 million for $28.89 million of STRC stated value, representing a 13.47% discount. It subsequently used $108.6 million from Bitcoin sales to retire another 1.15 million STRC shares. Repurchasing preferred stock below par removes more senior claims and future dividend obligations than the cash expended, and is accretive to Net Bitcoin Per Share—a metric measuring the amount of Bitcoin backing each common share, which the company uses to track value creation for equity holders.

Should Bitcoin Companies Accumulate Cash or Bitcoin?

For most Bitcoin companies, cash requirements should be tied to operating needs rather than an arbitrary reserve target. Notably, Strategy itself does not know how much reserve it needs to secure a better rating or attract more credit investors to STRC.

A cash-flowing company typically understands its cash outlay requirements. It should hold sufficient dollars to cover payroll, taxes, debt service, vendor payments, near-term capital expenditures, and a reasonable buffer for operating cash flow volatility. The appropriate reserve depends on the stability of those cash flows—a profitable business with recurring revenue, low fixed costs, and predictable expenses can operate with a smaller buffer, while a cyclical or capital-intensive business requires more.

Reserves should expand because the business requires liquidity, not because management desires a large cash balance. Once operating needs and a prudent liquidity buffer are covered, additional cash requires a specific economic purpose—competing against hurdle rates, repurchasing undervalued shares, reducing expensive liabilities, or investing in higher-return projects.

Strategy represents a very rare case. Its cash reserve exists solely because it is building a large credit issuance business atop a Bitcoin balance sheet while credit ratings agencies impose institutional inertia that treats legitimate, liquid assets as zero value. Companies without that liability structure—which encompasses essentially all other companies—have far less reason to accumulate dollars beyond their working capital buffer.

Disclaimer: This content was prepared on behalf of Bitcoin For Corporations for informational purposes only. It reflects the author's own analysis and opinion and should not be relied upon as investment advice. Nothing in this article constitutes an offer, invitation, or solicitation to purchase, sell, or subscribe for any security or financial product.

This article first appeared on Bitcoin Magazine and was written by Allard Peng.