The strategy’s announcement of a $216 million Bitcoin sale did not trigger the death spiral that some analysts predicted last week.
In fact, Grayscale now thinks the firm’s $1.25 billion BTC sales plan could help “support BTC price stability.”
Grayscale Research President Zach Pandl noted the following in his latest report:
The recovery in STRC price shows that investors now have more confidence in the instrument. The strategy is to sell more Bitcoin. But in our view, this will restore confidence in the financing structure and help Bitcoin find a more durable base.
Following Strategy’s announcement on Monday, the firm’s interest-paying preferred stock, Stretch (STRC), briefly rose above $90 for the first time since June 22.
STRC has fallen from the $100 pair level in mid-June due to broader market concerns about how the firm will fund its dividend obligations as the crypto winter drags on. Partially draining the initial USD reserve and paying off convertible debt further increased concerns.
To address these concerns, Strategy announced a new plan that includes an official BTC sale of $1.25 billion. The $216 million BTC sale is only the first step aimed at having a buffer to cover dividend obligations.
Bitcoin eclipses Strategy’s $216 million sale
Surprisingly, markets did not react negatively as they did to the Strategy Report. Sold 32 BTC. In the first week of June, BTC fell over 20% to $59,000 after Strategy announced that it had sold 32 BTC.
On Monday, BTC fell but quickly recovered losses and ended the day with gains of just 0.6%.
Most analysts expected a similar negative reaction if the firm went ahead with its $1.25 billion BTC sales plan. Actually JPMorgan warned He opposed this and instead proposed increasing the USD reserve to 3 years of coverage by selling MSTR shares.
For JPMorgan, such a BTC sale would directly drive the market lower.
Galaxy Research also echoed a similar warning, adding that selling BTC would not solve the firm’s problem:structural problems.” In fact, Galaxy added that such a move would trigger a BTC sell-off, which would put pressure on STRC and MSTR.
So far the market has allayed fears. In fact, analyst James Van Straten said this could signal a market bottom for BTC.
A bottom may come when bad news no longer pushes prices lower.
However, according to long-time Strategy critic Peter Schiff, the firm may still be losing money because it sold BTC below the average purchase price.
Considering the average cost of MSTR, this translates into a loss of around $15k per Bitcoin, or around $54 million. The total loss will be much greater when there are more than 840 thousand Bitcoins left to sell.
However, it is worth noting that BTC’s short-term recovery It will depend on the minutes of the FOMC meeting scheduled for July 8.
Final Summary
- Market overshadows Strategy’s $216 million BTC sale as price remains above $63K
- Grayscale stated that this move is supportive for BTC to find a more “durable base”.
