Strategy’s Recent Bitcoin (MSTR) The sale had a significant impact on market sentiment, but Wall Street bank Citi does not view the move as a change in the company’s long-term strategy.
The bank said the sale was anticipated after Strategy announced plans to divest some tax-disfavored bitcoin holdings during its first-quarter earnings call as part of a portfolio optimization effort.
“Recent flows have been negative and the chances of passage of a US market structure bill (a potential catalyst for renewed investor interest in our view) are diminishing,” analyst Alex Saunders wrote in his Tuesday report.
Markets were rattled this week after Strategy revealed the sale of a small portion of its bitcoin holdings, marking a rare departure from executive chairman Michael Saylor’s long-standing “buy and hold” approach.
Although the company said the transaction was related to tax planning considerations, the move raised concerns that one of Bitcoin’s most influential backers could become a seller, contributing to a period of weakness in BTC and renewed scrutiny of the digital asset’s cash flow model.
Saunders continues to view spot Bitcoin exchange-traded fund (ETF) flows as the primary driver of BTC prices, estimating that they account for approximately 45% of the weekly change in yield. The analyst said recent ETF flows have turned negative, highlighting a broader lack of investor demand for the cryptocurrency.
Although digital asset treasury companies have become significant buyers of Bitcoin, the analyst does not believe treasury-related sales are a major factor behind the recent weakness. Instead, the bank argued that ETF flows remain the clearest high-frequency measure of adoption and investor appetite.
The report also warns that the chances of a US crypto market structure bill passing this year appear to be diminishing, reducing the likelihood of a near-term catalyst for new investor inflows.
Combined with bitcoin’s underperformance relative to stocks, the fading legislative outlook is likely to keep sentiment muted in the absence of regulatory progress or new concerns over fiscal sustainability, the report adds.
Strategy’s disclosure of Bitcoin’s first sale in years weighed on sentiment this week, fueling concerns about a potential sale by treasury companies of digital assets and pushing BTC lower. The world’s largest cryptocurrency was trading around $67,200 at press time.
Read more: Bitcoin faces outsized quantum threat as computing breakthroughs accelerate, says Citi
