Strategy (MSTR -1.40%) (formerly known as MicroStrategy) selling its Bitcoin (BTC -1.51%) is not a reason for you to sell yours. The digital asset treasury (DAT) company led by Michael Saylor unloaded 3,328 BTC for a total of $213 million over the two weeks ending Aug. 9, adding to investors’ fears that the company’s sales would spark a larger sell-off just as its bear market seemed to be finally ending.
Saylor’s sales don’t bother me. In fact, I’m loading up on more Bitcoin. Here’s why.
Image source: Getty Images.
Buyers just gobbled up hundreds of millions in sales
As a DAT, Strategy can raise capital by issuing several different classes of stock, some of which pay holders a fixed cash dividend. Bitcoin produces no cash flows, so any dividends that the company pays to those shareholders either need to come from new stock issuance, typically from a different class of its shares, or from its Bitcoin holdings.
August saw both of those possibilities occur. Strategy sold 1,690 BTC for $108.6 million in the week ending Aug. 9 and then used the proceeds to buy back its preferred shares, shoring up their price. Three weeks later, it bought 4,603 BTC for $369.7 million, bringing its total holdings of the coin to 845,050 BTC as of Aug. 30.
Today’s Change
(-1.40%) $-2.02
Current Price
$142.80
Key Data Points
Market Cap
Day’s Range
$137.07 – $144.40
52wk Range
$81.81 – $365.21
Volume
27.2M
Avg Vol
23.7M
Gross Margin
67.60%
BlackRock’s iShares Bitcoin Trust brought in more than $1.5 billion of net inflows during the 10 trading days ending on Aug. 31. This is to say, one of many funds that hold Bitcoin saw vastly larger inflows than what Strategy sold. Spot Bitcoin exchange-traded funds (ETFs) took in more than any other single buyer disclosed that week. And Bitcoin’s price rose 21% during the month.
Should a change in Strategy’s selling change your investing plan?
Strategy’s filings tell you a great deal about Strategy and very little about Bitcoin, so investors probably shouldn’t fixate on them.
While the company holds a bit over 4% of the coin’s total possible supply of 21 million BTC, nothing it does can change the fundamental properties of the protocol, which is where its value comes from. Importantly, it’s the protocol’s tight, decreasing limits on the pace of Bitcoin production that create its scarcity.
Today’s Change
(-1.51%) $-1,224.04
Current Price
$79,620.00
Key Data Points
Market Cap
Day’s Range
$78706.00 – $81379.00
52wk Range
$57945.16 – $126079.89
Volume
28.9B
At the very most, Strategy buying up a lot of Bitcoin can stimulate higher prices if most of its supply is held rather than sold. But even selling some of its hoard only briefly adds to the supply available for purchase, which pressures the price downward rather than up; as established earlier, institutions and individuals buying the ETFs constitute a large and willing pool of demand for any supply that hits the market.
So, in the long run, as the newly available supply keeps shrinking, the presence of any one additional buyer (or seller) doesn’t mean much. And that’s why I’m continuing to buy more Bitcoin, whether Strategy decides to keep selling or not.