BIT Research: MicroStrategy shifts from being the largest buyer to a seller; how will the potential selling pressure of $7.5 billion affect Bitcoin?

Strategy (formerly MicroStrategy) was once one of the most aggressive Bitcoin buyers in the market and was known for its long-standing policy of "never selling." However, the company has recently begun selling Bitcoin to replenish its dollar reserves, pay preferred stock dividends and interest, and buy back Digital Credit Securities. This means that one of the important structural buyers that previously supported the Bitcoin market is now turning into selling pressure.

Meanwhile, the macro environment is improving. At the end of July's FOMC meeting, only 3 of the 12 voting members supported an interest rate hike, and the cooling labor market and declining inflation further reduced the likelihood of a rate hike in September. However, unlike stocks benefiting from pension allocations and corporate buybacks, and gold benefiting from central bank reserve diversification, Bitcoin lacks a similar stable structural buyer. Therefore, Strategy's continued selling has become an important variable affecting short-term market risk appetite.

MicroStrategy from Largest Buyer to Seller: Approximately $4.5 Billion in Bitcoin May Still Be for Sale

Strategy has accumulated approximately $62 billion worth of Bitcoin, even accelerating purchases during price declines. However, this trend has recently reversed. Analysts estimate that the company may plan to reduce its STRC (Digital Credit Securities) inventory from about $10 billion to $5 billion, and selling Bitcoin may become the main source of funding to achieve this goal. If so, the company may need to sell about $4.5 billion worth of Bitcoin, expected to be completed in batches over the next two to four months.

Although this selling scale is not huge relative to the overall Bitcoin market, its impact is more reflected in the risk appetite. Strategy has long played the role of a structural buyer, but is now gradually becoming a marginal seller. If the selling pace of about $100 million per week is maintained, the selling pressure may last longer; unless stronger macro catalysts emerge to drive a large-scale return of Bitcoin ETF buying, short-term rebounds may still be limited.

Deeper changes come from the capital model of Bitcoin reserve companies. The so-called "BTC Yield" largely came from the NAV premium of stocks relative to Bitcoin holdings. When this premium narrows or even turns into a discount, the model relying on capital market financing and continued Bitcoin accumulation also begins to face challenges.

NAV Discount Expands: Potential Selling Pressure from Bitcoin Reserve Companies May Reach $7.5 Billion

Among the 109 tracked Bitcoin reserve companies, 28 companies currently have a market value lower than their Bitcoin holding value, meaning their mNAV is below 1.0 times, and these companies collectively hold about $3 billion in Bitcoin. For companies whose stock prices are long-term below asset value, selling some Bitcoin and repurchasing shares may become a way to narrow the NAV discount and release shareholder value.

This means that potential selling pressure does not only come from Strategy. In the coming months, the potential selling scale from Bitcoin reserve companies may reach up to about $7.5 billion. Meanwhile, if these companies wish to re-attract capital, they also need to shift from a financing model relying on NAV premiums to strategies that can generate actual returns, such as selling Bitcoin covered call options, lending BTC, or engaging in basis trading.

However, the NAV discount also brings another side. Currently, the implied Bitcoin price corresponding to some reserve company stocks is only about $20,000, while the spot Bitcoin price is about $63,000, equivalent to about 0.3 times. In contrast, the implied Bitcoin price corresponding to MicroStrategy's stock price in November 2024 once reached 2-3 times the actual spot price. If management actively takes measures to narrow the discount, some companies may see significant valuation recovery potential.

Overall, Strategy's shift from a long-term structural buyer to a seller is changing the funding flow structure of the Bitcoin market. In the next two to four months, the company may still sell about $4.5 billion in Bitcoin, while the potential selling scale of all Bitcoin reserve companies may reach up to about $7.5 billion, which will continue to exert pressure on market risk appetite in the short term.

However, this change does not alter the judgment that Bitcoin is bottoming out, and the low point of this cycle is still expected to be formally established by the end of this month or next month. What is more worth paying attention to next is when Strategy's selling will clear, whether ETF buying can return, and whether Bitcoin reserve companies can release value again through proactive adjustments to capital strategies under the NAV discount.

Some of the above views come from BIT on Target, Contact us for the complete report of BIT on Target.

Disclaimer: The market has risks, and investment should be cautious. This article does not constitute investment advice. Trading in digital assets may carry significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consultation with financial professionals. BIT is not responsible for any investment decisions based on the information provided in this content.