Analyst Breaks Down Impact Of MicroStrategy Buys On Bitcoin
A research firm has detailed how the price of Bitcoin has reacted to purchases that Michael Saylor’s MicroStrategy has made over the years.
MicroStrategy Bitcoin Buys Followed by Negative Price Action
K33 Research, formerly Arcane Research, has released a new piece of analysis that looks at how the market has been impacted by each buying spree that MicroStrategy has undertaken.
The research firm found that Bitcoin generally saw an upside during periods when MicroStrategy made its purchases. Please note that during, what is meant here are the actual dates when purchases took place and not when the announcements were made.
Here is a chart that displays Bitcoin returns during each of the periods when MicroStrategy has bought at least 1,000 BTC in recent years:
Looks like the greatest positive return was registered back in August 2021 | Source: K33 Research
As shown in the chart above, although this was not the case every time, these periods still tended towards positive returns for the cryptocurrency. The latest purchase, where the company acquired 6,455 BTC (and also paid off its Silvergate loan in full), saw the coin surge by 17%.
On average, Bitcoin saw positive returns of around 6.2% during these buying periods. This trend naturally makes sense, as the research firm noted that MicroStrategy buys act as a constant buying presence in the market.
Now, the most interesting trend becomes visible when looking at the asset returns that followed immediately after MicroStrategy made formal announcements of its purchases. The chart below shows BTC performance on the same day of these announcements, as well as a week after them, over the past few years.
BTC has generally seen red returns after these announcements | Source: K33 Research
Unlike buying periods, announcements made by MicroStrategy often have a negative market reaction. On the days when the company made these announcements, the price suffered an average drop of 2.2%. Relative to weekly returns after the announcements, average returns were negative, but only slightly at -0.2%. After the news of the company’s latest purchase, Bitcoin suffered a 3% drop
As for why these red returns are often seen following such announcements, explains K33 Research, “this market reaction may be caused by market participants soaking up information that a known large buyer has ended, meaning less liquidity than buy side to further support the upside. ”
In September, MicroStrategy signed a sales agreement with Cowen and BITG, which allows them to issue and sell shares at an aggregate price of up to $500 million.
So far, the company has issued and sold $385.8 million worth of shares, meaning it can only issue and sell shares worth $114.2 million to buy more Bitcoin.
“So, while MicroStrategy was able to prepay its Silvergate loan at a 25% discount, the market is pricing in that a known large buyer has less short-term gunpowder to generate bullish momentum,” notes the research firm.
BTC price
At the time of writing, Bitcoin is trading around $27,900, up 1% over the past week.
The value of BTC has seen some drawdown in recent hours | Source: BTCUSD on TradingView
Kanchanara featured image from Unsplash.com, charts from TradingView.com, K33.com