Despite his growing footprint as a major Bitcoin (BTC) holder, large-scale purchases of the strategy cryptocurrency seem to have little or even an influence on his price, according to a Cowen TD research document.
The results published Monday question a popular theory among skeptics – this aggressive purchasing frenzy of this strategy contributes to supporting the value of Bitcoin, and that without its continuous request, prices would vacillate. But on the basis of data, this argument does not have much weight, analysts said.
A big buyer, but a small tranche on the market
The strategy recently issued 1.8 million shares as part of its market level offer (ATM), increasing additional dollars in net products. Funds were used to buy 6,556 bitcoins, increasing the company’s bitcoin yield from 1% to 12.1%. However, when they are measured compared to the wider bitcoin market, these purchases are only a drop in the bucket.
According to the TD Cowen analysis, stratum bitcoin purchases generally only represented 3.3% of the weekly trading volume on average. In the past 27 weeks, the total activity of the company amounted to 8.4% of the volume – but this figure was biased by a handful of weeks when its purchases briefly increased by 20%. During eight of these weeks, the strategy did not buy Bitcoin at all.
“Our conclusion is that in most periods, it does not seem plausible that the purchases of the strategy could have had a sustained material impact on the price of bitcoin,” wrote TD Cowen analysts.
Correlation? Not much.
The analysis also tested the relationship between Bitcoin purchases and strategy market prices – and found it statistically weak. The correlation coefficient between the weekly strategy purchase volume and the BTC price at the end of the week came to only 25%. When comparing purchases to weekly price changes, the correlation has only increased slightly to 28%.
Given a correlation coefficient close to 0 does not suggest correlation or low correlation, these results indicate little or no link between strategy actions and short -term market movements – not to mention any kind of sustained price influence, the document said.
What about overhang minors?
Another common criticism is that the strategy frequently buys more bitcoin than what is extracted in a given period, which implies that it creates upward pressure. Although technically true, the analysis shows that this argument includes the operation of the Bitcoin market.
Over the past six months, secondary Bitcoin trading has exceeded the mining volume of almost 20 times. Even by removing purchases from the equation strategy, the activity of the secondary market always exceeds the new offer of 17 times. In this environment, minors and buyers are price takers – not setters.
“As we have seen, his purchases represent a very low percentage of the total volume of Bitcoin trading; therefore the idea that he has somehow a deep or even notable impact on the action of the Bitcoin price seems incongruous, for us,” said TD Cowen.
Building value, not the media threw
Although the influence of the Bitcoin market strategy can be overestimated, the value it is generated for shareholders is more difficult to ignore.
Last week’s purchases have created an estimated progressive gain of 5,281 bitcoins, bearing a quarter -up -to -date gains at almost $ 600 million. Since the beginning of 2023, the strategy has increased its Bitcoin holdings by 306%, while only widening its number of entirely diluted shares by 94% – a strong demonstration for a company using Bitcoin as a strategic treasure asset.
With $ 1.53 billion in remaining ATM capacity and the approval of the Board of Directors for a higher authorization, the strategy is well positioned to continue this strategy – without disturbing the even market on which it bets.
“We expect the strategy will continue to stimulate positive performance in BTC in the foreseeable future. Although BTC yield is likely to fall insofar as Bitcoin continues to increase the price, the dollar value of additional gains in the Treasury of the Strategy could remain very advantageous for shareholders,” the analysts wrote.
Warning: Parties of this article were generated with the help of AI tools and examined by our editorial team to guarantee accuracy and membership of our standards. For more information, see the complete Coindesk AI policy.
