Strategy (formerly MicroStrategy) was once one of the most aggressive buyers of Bitcoin in the market, long renowned for its stance of "never selling." However, the company has recently begun selling Bitcoin to replenish its US dollar reserves, pay preferred stock dividends and interest, and repurchase Digital Credit Securities. This signifies that a key structural source of buy-side support for the Bitcoin market in the past is now transforming into selling pressure.
At the same time, the macroeconomic environment is improving. At the July FOMC meeting, only 3 out of 12 voting members supported an interest rate hike. Cooling labor market data and declining inflation further reduce the likelihood of a rate hike in September. However, unlike stocks, which benefit from pension fund allocations and corporate buybacks, or gold, which benefits from central bank reserve diversification, Bitcoin lacks a similar stable structural buy-side flow. Therefore, Strategy's ongoing sales have become an important variable affecting short-term market risk appetite.
MicroStrategy From Top Buyer to Seller: Possibly Still Has Around $45 Billion in Bitcoin to Sell
Strategy has cumulatively purchased Bitcoin worth approximately $62 billion, even accelerating its purchases during price declines. Recently, however, this trend has reversed. According to analyst estimates, the company may plan to reduce its STRC (Digital Credit Securities) balance from about $100 billion to around $50 billion. Selling Bitcoin could be a primary funding source for achieving this goal. If so, the company might need to sell approximately $45 billion worth of Bitcoin, expected to be executed in batches over the next two to four months.
While this selling scale is not enormous relative to the overall Bitcoin market, its impact is more pronounced at the level of risk appetite. Strategy previously played the long-term role of a structural buyer but is gradually becoming a marginal seller. If the selling pace of about $100 million per week is maintained, the selling pressure could persist for a longer duration. Unless stronger macro catalysts emerge, driving a large-scale return of Bitcoin ETF buying, short-term rebounds may remain constrained.
The deeper change stems from the capital model of Bitcoin reserve companies. The so-called "BTC Yield" in the past largely came from the premium of their stock price relative to the NAV (Net Asset Value) of their Bitcoin holdings. As this premium narrows or even turns into a discount, the model of relying on capital market financing to continuously increase Bitcoin holdings is also facing challenges.
NAV Discount Widens: Potential Selling Pressure from Bitcoin Reserve Companies Could Reach Up to $75 Billion
Among the 109 tracked Bitcoin reserve companies, 28 currently have market capitalizations below the value of their Bitcoin holdings (i.e., mNAV below 1.0x). These companies collectively hold around $3 billion worth of Bitcoin. For companies whose stock prices have long traded below their asset value, selling part of their Bitcoin and repurchasing shares could be a way to narrow the NAV discount and unlock shareholder value.
This implies that potential selling pressure is not solely from Strategy. Over the coming months, the potential total selling volume from Bitcoin reserve companies could reach up to approximately $75 billion. Meanwhile, if these companies hope to attract capital again, they need to shift from financing models reliant on NAV premiums to strategies capable of generating actual returns, such as selling covered call options on Bitcoin, lending BTC, or conducting basis trades.
However, the NAV discount also presents another side. Currently, the implied Bitcoin price for some reserve company stocks is only around $20,000, while the Bitcoin spot price is about $63,000, equivalent to roughly a 0.3x multiple. In contrast, in November 2024, MicroStrategy's stock price implied a Bitcoin value reaching 2-3 times the actual spot price. If management takes proactive measures to narrow the discount, some companies could experience significant valuation repair potential.
Overall, Strategy's shift from a long-term structural buyer to a seller is altering the capital flow structure of the Bitcoin market. Over the next two to four months, the company may still sell around $45 billion worth of Bitcoin, while the total potential selling volume from the entire Bitcoin reserve company sector could reach up to $75 billion. This will likely continue to exert pressure on short-term market risk appetite.
Yet, this change does not alter the judgment that Bitcoin is bottoming out. The low point of this cycle is still expected to be firmly established by the end of this month or next. What deserves closer attention going forward is when Strategy's selling clears, whether ETF buying can return, and whether Bitcoin reserve companies trading at NAV discounts can unlock value again through proactive adjustments to their capital strategies.
The above views are partly sourced from BIT on Target. Contact us for the full BIT on Target report.
Disclaimer: Markets are risky; invest with caution. This article does not constitute investment advice. Trading 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.
