Summary
- Strategy’s first Bitcoin sale and disposal of $128 million in stock have raised the possibility of further selling pressure.
- Bitcoin has fallen about 16%% over the past week and Stretch has dropped about 12%%, increasing the chances of additional asset sales if dividend burdens rise.
- A sharp drop in Bitcoin prices over the past two quarters, along with a surge in whale investors’ Bitcoin deposits to exchanges, is weakening investor sentiment and increasing the likelihood of further selling.
Forecast Trend Report by Period
Concern is mounting over Strategy’s Bitcoin accumulation strategy after Michael Saylor’s company carried out its first-ever sale of the cryptocurrency.
ZyCrypto reported on June 6 that Zach Pandl, Grayscale’s head of research, said Strategy’s recent Bitcoin sale could lead to additional selling pressure. The company recently sold 32 BTC from its holdings of about 843,706 BTC. It also disposed of $128 million of stock at the same time.
Pandl said the shift in strategy could also affect Stretch, the company’s floating-rate preferred stock. Under the current structure, a drop in Bitcoin prices combined with rising dividend costs could create further selling pressure.
The market has reacted negatively to Strategy’s first Bitcoin sale. Bitcoin has fallen about 16% over the past week, while Stretch has dropped about 12% since the sale. If Bitcoin prices keep falling and the burden of dividend payments rises, the company could face greater pressure to sell additional assets to raise cash.
Strategy also has limited room to aggressively buy more Bitcoin at current prices, Pandl said. He added that the structure could create new challenges for the company.
Institutional investor sentiment is deteriorating quickly. Digital-asset investment products posted $1.4 billion in outflows last week, with rising geopolitical tensions and broader market weakness weighing on sentiment. Long-term investors have also turned more cautious amid concerns that losses could deepen during the recent downturn.
Bitcoin has undergone a sharp correction over the past two quarters. After trading above its all-time high of $125,000, it recently fell to around $61,000. At the time of writing, Bitcoin was down 2.2% on the day and about 23% over the past 30 days.
On-chain data also points to growing investor anxiety. CryptoQuant said Bitcoin deposits by large investors to centralized exchanges have surged recently. Exchange inflows are generally interpreted as a sign that the likelihood of selling is increasing.
CryptoQuant said whale Bitcoin inflows to Binance jumped sharply. About 8,200 BTC was deposited on June 2, followed by more than 6,400 BTC on June 4. The monthly average of whale inflows, which stood at about 1,200 BTC in mid-April, has now risen above 2,800 BTC, more than doubling in just a few weeks.
YM Lee
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