Despite its growing footprint as an important corporate head of Bitcoin (BTC), the purchases of the cryptocurrency strategy seem to have little, if there is none, in its price, according to a research work by TD Cowen.
The findings published on Monday challenge a popular theory among skeptics: the aggressive purchase of the strategy is helping to contribute the value of Bitcoin, and that without their continuous demand, prices would fail. But according to the data, that argument does not have much weight, analysts said.
A great buyer, but a small portion of the market
The strategy recently issued another 1.8 million shares under its offer in the market (ATM), raising additional $ 842 million in net income. The funds were used to buy 6,556 bitcoins, which increases the company’s bitcoin yield this quarter by 1% to 12.1%. However, when measured against the largest market of Bitcoin, these purchases are just a fall in the cube.
According to the TD Cowen analysis, Bitcoin strategy purchases have generally represented only 3.3% of the weekly negotiation volume on average. In the last 27 weeks, the total activity of the company amounted to 8.4% of the volume, but this figure was biased for a handful of weeks in which its purchase briefly increased more than 20%. In eight of those weeks, the strategy did not buy any bitcoin at all.
“Our conclusion is that in most periods, it does not seem plausible that strategy purchases could have had a sustained material impact on the price of Bitcoin,” wrote TD Cowen analysts.
Correlation? Bit.
The analysis tried even more the relationship between Bitcoin’s purchases of the strategy and market prices, and found that it was statistically weak. The correlation coefficient between the weekly purchase volume of strategy bitcoins and the price of BTC at the end of the week reached only 25%. When comparing purchases with weekly price changes, the correlation increased only 28%.
Since a correlation coefficient close to 0 suggests a non -or weak correlation, these results indicate little or no link between the actions of the strategy and market movements in the short term, much less any type of influence of sustained prices, said the document.
What is to overcome the miners?
Another common critic is that the strategy frequently buys more bitcoin than is extracted in a given period, which implies that it is creating a rising price pressure. While it is technically true, the analysis shows that this argument misunderstands how the Bitcoin market works.
In the last six months, Bitcoin’s secondary trade has exceeded the mining volume in almost 20 times. Even eliminating purchases of the equation strategy, secondary market activity still exceeds the new offer in 17 times. In that environment, miners and buyers are equal to the lenders, not the setters.
“As we have seen, their purchases represent a very small percentage of the total volume of Bitcoins trade; therefore, the idea that it somehow has a deep or even remarkable impact on the action of Bitcoin’s price seems incongruous, for us,” said TD Cowen.
Construction value, not exaggeration
While the influence of the Bitcoin market strategy can be exaggerated, the value generated for shareholders is more difficult to ignore.
Last week’s purchases created an estimated incremental gain of 5,281 bitcoins, which raises quarter to almost $ 600 million. Since the beginning of 2023, the strategy has increased its Bitcoin holdings by 306%, while only expanding its completely diluted actions by 94%, a great appearance for a company that uses Bitcoin as an asset of the strategic treasure.
With $ 1.53 billion in the remaining ATM capacity and the approval of the Board for a greater authorization of shares, the strategy is well positioned to continue this strategy, without interrupting the same market in which it is betting.
“We hope that the strategy will continue to generate a positive BTC yield in the predictable future. While BTC’s performance will probably fall to the extent that Bitcoin continues to increase in the price, the dollars value of the incremental profits of the treasure operations of the strategy could continue to be very advantageous for shareholders,” the analysts wrote.
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