Jiang Zhuoer, founder of Chinese Bitcoin mining pool BTC.TOP, has raised concerns that MicroStrategy’s recent statements about its dividend capacity could be a precursor to selling some of its massive Bitcoin holdings. In a social media post, Zhuoer suggested that the company’s claim of being able to pay 32 years of dividends using its Bitcoin stash may be a strategic message to prepare investors for a potential sale.
MicroStrategy’s Dividend Obligations
MicroStrategy (Nasdaq: MSTR) holds approximately $55 billion in Bitcoin. The company has annual dividend obligations of around $1.7 billion tied to its perpetual preferred stock (STRC). Zhuoer noted that while MicroStrategy is not at risk of a leveraged liquidation and is unlikely to default on its dividends, the mere possibility of selling Bitcoin to fund these payments could weigh heavily on market sentiment.
Dilutive Fundraising Raises Questions
Zhuoer pointed out that MicroStrategy has been purchasing Bitcoin over the past two weeks by issuing additional common stock. He described this as a dilutive fundraising method that is not easily sustainable over the long term. This approach, combined with the dividend narrative, creates a scenario where investors may begin to anticipate a shift in the company’s Bitcoin strategy.
Market Implications
If MicroStrategy were to sell even a fraction of its Bitcoin holdings to cover dividends, it could introduce significant selling pressure into the market. Given the company’s outsized position in the cryptocurrency, any such move would be closely watched by traders and could influence broader market dynamics. Zhuoer’s comments highlight a growing debate about the sustainability of corporate Bitcoin strategies that rely on continuous equity issuance.
Conclusion
While MicroStrategy has not indicated any immediate plans to sell Bitcoin, the combination of dividend obligations and dilutive fundraising has sparked caution among industry observers. Zhuoer’s warning serves as a reminder that even well-capitalized Bitcoin holders face strategic trade-offs that can impact market confidence.
FAQs
Q1: Is MicroStrategy at risk of a leveraged liquidation?
No, according to Jiang Zhuoer, MicroStrategy is not at risk of a leveraged liquidation and is unlikely to fail to pay its dividends.
Q2: How much Bitcoin does MicroStrategy hold?
MicroStrategy holds approximately $55 billion in Bitcoin as of the time of this analysis.
Q3: Why is MicroStrategy issuing common stock to buy Bitcoin?
The company has been issuing additional common stock as a dilutive fundraising method to purchase more Bitcoin, though Zhuoer warns this approach may not be sustainable long-term.
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