Grayscale Flags Risks to Strategy's Leveraged Bitcoin Model
Grayscale has raised concerns about the sustainability of Strategy’s leveraged Bitcoin holdings following the company’s first-ever BTC sale, which triggered a 16% drop in the asset’s price and a 12.8% decline in Strategy’s stock (STRC). According to Grayscale's head of research Zach Pandl, Strategy’s ability to continue accumulating Bitcoin is now severely constrained, potentially compounding market volatility.
On June 5, Bitcoin traded at $61,763, down 3.41% over the past 24 hours, capping a broader selloff that began after Strategy offloaded 32 BTC earlier in the week. Despite representing only 0.004% of its massive 843,706 BTC holdings, the sale rattled market sentiment, particularly as it coincided with Strategy selling $128 million in shares. STRC stock now trades at $126, marking a two-month low.
“The shift in approach from one of the largest BTC holders has weighed on sentiment,” Pandl said. He highlighted additional risks stemming from Strategy’s variable rate preferred equity instrument, Stretch (STRC), which is designed to trade at $100 with an 11.5% dividend but is currently priced below par at $95. If Strategy raises the dividend to attract investors, its cash obligations could grow, forcing further Bitcoin sales and perpetuating a negative feedback loop.
Market dynamics surrounding Bitcoin have already been volatile. In May 2026, spot Bitcoin ETFs, including Grayscale’s GBTC, saw significant outflows—$1 billion between May 11 and May 15 alone—as investors rotated into lower-fee products like BlackRock’s IBIT. GBTC, which once held over 600,000 BTC, has faced persistent redemption pressure since its conversion to a spot ETF in January 2024.
Gold investor Peter Schiff echoed Pandl’s concerns, suggesting that Strategy’s need to stabilize Stretch could accelerate Bitcoin sales, further straining liquidity. “If Strategy is forced to increase the dividend to return STRC to $100, it will run out of cash much sooner, pulling forward Bitcoin sales to fund payments,” Schiff argued on social media.
Despite the bearish tone, some analysts see a silver lining. Jeff Ko, chief analyst at CoinEx, told Cointelegraph that Strategy’s pivot to selling Bitcoin could provide the company greater flexibility in managing balance sheet risks. “A more dynamic approach to BTC holdings may help Strategy avoid locking itself into a one-way accumulation strategy under all market conditions,” Ko said.
Still, the broader implications for the Bitcoin market are significant. Strategy’s leveraged model has been a cornerstone of institutional crypto exposure, and any sign of stress reverberates across the ecosystem. Pandl concluded that a reduction in highly leveraged corporate Bitcoin holdings could ultimately benefit the market. “For the health of the Bitcoin ecosystem over the long run, less BTC on levered digital asset treasury balance sheets and more on diversified corporate balance sheets will be a positive,” he said.
With Bitcoin’s market cap at $1.22 trillion as of June 5, 2026, and institutional players like Strategy under pressure, traders will be closely watching for further developments, particularly any changes to STRC dividends or additional BTC sales. For now, the market remains on edge.