Corporate Bitcoin Buying May Rebound Late This Year, With Flows Focused on Stronger Firms

Corporate Bitcoin purchases could resume late this year if Bitcoin prices rebound, though investor capital is expected to concentrate in companies with strong balance sheets.

Cointelegraph reported on Oct. 19 that Ryan Rasmussen, Bitwise's head of research, said corporate Bitcoin buying, which slowed sharply in the third quarter, could recover as early as year-end and continue expanding into next year.

Corporate Bitcoin buying dropped sharply in the third quarter. Strategy, the publicly traded company with the world's largest Bitcoin holdings, saw net purchases fall to 1,666 BTC in the third quarter from 83,901 BTC in the second quarter. Net purchases by other listed companies also fell to 5,617 BTC from 45,725 BTC over the same period.

Jag Kooner, Bitfinex's head of derivatives, said whether companies resume buying Bitcoin depends on a recovery in stock premiums. If a company's shares trade above the net asset value of its Bitcoin holdings, it can raise funds for additional purchases through new share issuance without diluting existing shareholders' Bitcoin holdings per share.

Still, a repeat of last year's indiscriminate capital inflows will be difficult to recreate. Kooner said investors are now valuing companies based on funding costs, financial health and Bitcoin holdings per share. Bitcoin buying could resume if prices rise, but a broad fundraising boom like last year's is unlikely to return.

The shift is already visible. Of the companies that embraced Bitcoin treasury strategies last year, 12 sold all of their holdings in the third quarter of this year. As stock premiums disappeared, they sold Bitcoin to repay debt or return capital to shareholders. That raises the prospect that future inflows will be concentrated in existing large companies with liquidity, fundraising capacity and an operating track record.

Spot exchange-traded funds may still help support Bitcoin prices even if corporate buying does not recover. Rasmussen said spot Bitcoin ETFs recorded total net inflows of $6.4 billion in the third quarter. More recently, however, U.S. spot Bitcoin ETFs have posted outflows for two straight weeks, with net withdrawals of about $229 million last week.

Without corporate buying, the Bitcoin market would become even more reliant on demand from institutional investors that adjust allocations according to the macroeconomic environment, Kooner said. He added that ETF inflows alone may not be enough to keep a market recovery on stable footing.