The world’s largest Bitcoin treasury firm, Strategy, plans to increase its Bitcoin sales fourfold to $5B. During its earnings report call on Thursday, Strategy’s President and CEO Phong Le reiterated that,
Our intent is to sell Bitcoin for three reasons when we think it’s appropriate for the company.
First, they’ll increase their U.S dollar reserve by up to $1.25B to bring the total cash buffer to $5B or about 3 years of coverage.
This is the coverage target initially recommended by JPMorgan analysts. But the bank urged use of MSTR sales, not BTC.
Secondly, it will fund annual dividend payments, linked to Stretch [STRC] and other preferred stocks. For this, Strategy is eyeing $1.76B funding from BTC sales. Finally, Phong Le said they’ll use an extra $2B to drive the repurchase programs of its stocks.
Collectively, this brings the planned crypto sales to $5.01B-A 4X increase from its initial Bitcoin monetization program set at $1.25B earlier in July.
Will Strategy’s sales affect BTC’s price?
Worth noting, the firm had previously sold $216M to fund dividend obligations. At that time, the market was pricing only the $1.25B sales program. In fact, Grayscale said that the plan would “restore confidence” in Strategy’s financing structure and help BTC form a durable bottom.
Whether the asset manager still has the same outlook after Strategy plans to offload 4X more BTC remains unclear.
If the firm increased its planned BTC sales to $5B within a month, what could stop it from reviewing the sales upwards in the future if the market downturn extends?
Unless offloaded via OTC (over the counter) to avoid directly impacting the spot market, the Strategy BTC sale could become another headwind.
The move could be positive for STRC and help bring it to the target level of $99-$100. Besides, MSTR stock could also benefit from the stock buyback. But BTC will ultimately be the loser here, especially if the sales negatively affect market sentiment.
In fact, Galaxy Research’s earlier warning about the firm’s BTC offloading could become apparent.
According to Galaxy analysts, Strategy’s BTC sales would not resolve its ‘structural issues’ unless it generates recurring income from a section of its BTC holdings. This could help it fund obligations without dumping its BTC holdings and dragging the entire market with it.
More pressure for BTC?
Worse still, as Bitcoin [BTC]’s largest whale offloads its stash, long-term holders (LTHs) are also actively reducing their exposure.
At the same time, U.S spot BTC ETF inflows remain negligible, leaving little demand to absorb Strategy’s expected selling pressure.
Final Summary
- Strategy is set to increase its BTC sales fourfold from $1.25B to $5B
- This would add selling pressure from long-term holders (LTHs) and ETF outflows
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