Strategy adds 811 Bitcoin as leverage falls to 3% – Room for bigger buys?

Strategy is continuing to increase the size of its Bitcoin [BTC] treasury. This comes with the latest addition of 811 BTC during the last week of October and the first week of November.

This purchase took its total holdings to 849,327 Bitcoins. Strategy also purchased $208 million of STRC. This demonstrated additional utilization of the company’s capital structure to fund both shareholder and treasury-related activities.

It’s worth noting that Strategy still holds $4.9 billion in USD, providing liquidity for future purchases and financial obligations.

By controlling over 4% of the total supply of Bitcoin in circulation today, Strategy is limiting the number of coins available for purchase by all market participants.

While Strategy may continue to add to its existing inventory of BTC and create greater institutional demand for them. Moreover, it will also have an increasing degree of sensitivity to changes in their value due to its increased exposure.

Strategy’s leverage falls to 3%

Strategy’s declining leverage demonstrates the changing financial condition of Strategy as its Bitcoin treasury has grown. At the beginning of January 2023, the strategy’s overall leverage was approximately 108%.

As such, Strategy was then more sensitive to its obligation to repay debt compared to its current reserves.

However, by November, Strategy’s overall leverage had declined to just 3%. Even though Strategy held significantly more Bitcoin at that time, the decline in leverage is a reflection of a much healthier balance sheet on the part of Strategy.

These resources give it more room to manage debt and fund operations without immediately selling Bitcoin.

Thus, Strategy will be able to accumulate Bitcoin through the entire range of prices. This includes down markets and maintaining the demand for Bitcoin among institutions while minimizing its own exposure to price fluctuations.

Institutional Bitcoin custody risks grow

Strategy has continued to develop its treasury strategy. However, safety of custody for institutional investors is a major component of increasing investor demand.

Institutional investors that have large holdings of Bitcoins need to be able to protect their investments by taking measures to avoid loss through theft or unauthorized transactions.

Many institutional investors now use cold storage systems and multi-signature wallet structures. The multi-signature system requires consent of more than two parties before any transaction can occur.

Safety and transparency of custody and reporting will be key in maintaining the confidence of institutional investors in Bitcoin. Those elements could also be used to help sustain the interest of institutional investors regardless of the current market conditions.

Final Summary

• Strategy currently holds 849,327 BTC in its treasury, representing more than 4% of all the Bitcoins that exist.

• Strategy cut leverage to 3%, but custody risks could threaten institutional demand.