Despite its growing footprint as a major business owner of Bitcoin (BTC), the strategy’s big purchase of cryptocurrency seems to have suffered if any, an impact on its price, according to a research document from TD Cowen.
The results published on Monday challenge a popular theory among skeptics – that the strategy’s aggressive purchase Spree helps support Bitcoin’s value and that prices without its continued demand would falter. But based on the data, this argument does not have much weight, the analysts said.
A great buyer but a small slice of the market
Strategy recently issued another 1.8 million shares under its market (ATM) offer and raised another $ 842 million in net proceeds. The funds were used to buy 6,556 Bitcoins, which increased the company’s Bitcoin yield this quarter by 1% to 12.1%. However, when measured against the wider Bitcoin market, these purchases are just a decrease in the bucket.
According to the TD Cowen analysis, the strategy Bitcoin typically buy the sign for only 3.3% of the weekly trading volume on average. Over the past 27 weeks, the company’s total activity accounted for 8.4% of volume – but this figure was skewed by a handful of weeks when it bought cards of 20%. For eight of these weeks, the strategy did not buy any bitcoin at all.
“Our conclusion is that in most periods it does not seem to be plausible that the strategy’s purchase could have had a sustained, significant influence on the price of Bitcoin,” wrote TD Cowen analysts.
Correlation? Not much.
The analysis further tested the relationship between the strategy’s Bitcoin purchase and market prices – and found it was statistically weak. The correlation coefficient between the strategy’s weekly Bitcoin purchase volume and BTC price at the end of the week came in at only 25%. When comparing purchases with weekly price changes, the correlation rose only slightly to 28%.
Given a cohesive coefficient close to 0 suggests no or weak correlation, these results indicate a little to no connection between the actions of the strategy and short-term market movements-not to say any sorts of sustained price influence, the paper says.
What about transitions miners?
Another common criticism is that strategy often buys more Bitcoin than it has been extracted in a given period, which means it creates upward price. Although technically true, the analysis shows this argument misunderstands how the Bitcoin market works.
Over the past six months, the secondary Bitcoin trading has surpassed mining volume by almost 20 times. Even the removal of the strategy’s purchase from the equation, the secondary market activity still exceeds new supply by 17 times. In this environment, both miners and buyers are awarded award – not settlers.
“As we have seen, its purchase represents a very small percentage of the total Bitcoin trading volume; thus the idea seems that it somehow has a deep or even remarkable influence on Bitcoin preaching, inconsistent for us,” said TD Cowen.
Building value, not hype
While the strategy’s influence on the Bitcoin market can be exaggerated, the value it is generated for shareholders is more difficult to ignore.
Last week’s purchase created an estimated incremental gain of 5,281 Bitcoins, which brought quarter to date winnings to almost $ 600 million. Since the beginning of 2023, the strategy has increased its Bitcoin stocks by 306%, while it only expanded its fully diluted stock count by 94% – a strong show for a company that uses Bitcoin as a strategic treasury’s asset.
With $ 1.53 billion in the remaining ATM capacity and board approval for a larger stock lawyer, the strategy is well placed to continue this strategy to disturb the market itself.
“We expect the strategy to continue to drive a positive BTC yield in the foreseeable future. While BTC yields are likely to fall to the extent that Bitcoin continues to rise in price, the dollar value of incremental gains from the strategy’s Finance Ministry may remain very advantageous to shareholders,” the analysts wrote.
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