Experts Assess Strategy’s Bitcoin Purchases on Market Impact

The billion-dollar acquisitions of digital gold by Strategy have had minimal long-term impact on its price, according to a TD Cowen study, as reported by CoinDesk.

On average, Strategy’s coin purchases account for about 3.3% of the weekly trading volume and are largely unaffected by price fluctuations, analysts noted. Excluding the eight weeks when the corporation paused its buying, this figure rose to approximately 8.4%.

The correlation coefficient between Strategy’s weekly bitcoin purchases and the asset’s end-of-week price was a mere 25%.

This finding contradicts a popular theory among skeptics that the corporation’s actions support the cryptocurrency’s price and that without constant demand, its value would decline.

Another common narrative is that Strategy’s purchases exceed the mining of digital gold, creating upward pressure on the price. While technically true, the analysis reveals a misunderstanding of the bitcoin market’s dynamics.

In the past six months, the volume of secondary trading in the leading cryptocurrency has exceeded mining output by nearly 20 times.

Even excluding Strategy’s actions, secondary market activity still surpasses new supply by 17 times. Under these conditions, miners and buyers cannot set prices, experts emphasized.

“Strategy’s acquisitions represent a very small fraction of total trading volume, so the idea that it somehow significantly influences price dynamics seems absurd,” the review stated.

Are Shareholders Satisfied?

Strategy’s bitcoin strategy has yielded substantial profits for its investors. Since the start of 2023, the value of the corporation’s coins has increased by 306%, while the number of fully diluted shares rose by 94%.

According to TD Cowen, the company is well-positioned to continue in this direction without destabilizing the market it targets.

“We expect Strategy to continue delivering positive returns in the foreseeable future,” the specialists noted.

New Acquisitions

On April 21, the company announced an increase in its bitcoin holdings by 6556 BTC. Strategy spent $555.8 million, averaging $84,785 per coin. The investment’s return since the beginning of the year was 12.1%.

From April 14 to 20, Strategy sold 1.76 million common shares (MSTR) and over 91,000 preferred shares and bonds (STRK), raising a total of $555.5 million.

Earlier, the company announced plans to raise up to $21 billion in MSTR and $21 billion in STRK over the next three years to accumulate more coins as part of its “21/21 plan”.

As of April 20, $1.53 billion in MSTR and $20.96 billion in STRK remained available for issuance.

With the latest acquisition, Strategy now holds a total of 538,200 BTC valued at $36.47 billion. The average purchase price is equivalent to $67,766 per BTC.

Back in the first quarter, the company reported unrealized losses amounting to $5.91 billion.